From the terminal point of view, the aluminum market inventory level is low. If the aluminum price quickly pull up, will drive the downstream replenishment, easy to form a positive feedback. However, before the start of the peak season in March, aluminum prices are expected to remain weak.

Aluminum processing and end-consumer enterprises have been on holiday before the festival. Against the background of the lack of consumption, frequent favorable macro policies have changed the expectation of consistent bearish aluminum prices. In addition, the LME may change its warehousing rules to make it take longer to queue for aluminum ingots to be delivered, which will stimulate short covering and lead to a rebound in aluminum prices.

Macro bullish break bearish aluminum price consensus expectations

A year ago, the market was relatively pessimistic about the price of aluminum, aluminum prices as low as 12500 yuan/ton, or even 12,000 yuan/ton. The pessimism is mainly due to the low economic growth expectation of the market in 2019. At the end of 2018, the signing status of long order for downstream processing and long order for terminal automobile parts processing is not ideal. However, since New Year's day this year, the macro frequent positive signal, changing the consumption growth expectations. Macro - positive mainly reflected in the release of liquidity and stimulate consumption. China has released a total of 800 billion yuan of medium - and long-term liquidity through the deposit reduction of financial institutions, targeted medium-term lending facilities and targeted dynamic assessment of RRR reduction of inclusive finance.

This week will see the most intensive issuance of local government bonds in zui's history: 18 provinces, autonomous regions and municipalities have launched public tenders to issue local government bonds, totaling 288.4 billion yuan. Before the Spring Festival, local government debt issuance will exceed 400 billion yuan. In addition, ten ministries and commissions jointly issued the implementation plan (2019) for further optimizing supply, promoting stable growth of consumption and forming a strong domestic market to encourage the upgrading of automobile and household appliances consumption. The intensive promotion of favorable economic policies will weaken the traditional rhythm of supply and demand in slack and peak seasons, and meanwhile improve consumption expectations.

Industry losses hinder electrolytic aluminum output

From the perspective of supply, the price of 13,300 yuan/ton is used to calculate the domestic electrolytic aluminum cost in December 2018. The cash cost of the whole industry has been in the red to 75% of the threshold line, and the production cut has added new troops. According to SMM, shandong huayu will shut down before the Spring Festival, with a production capacity of 100,000 tons. Shanxi shenghua aluminum will cut production by 45,000 tons before the Spring Festival, and all of them will be shut down by the end of march, involving a production capacity of 195,000 tons. Chinalco shanxi xincai shut down 100 electrolytic cells this week, with a capacity of 75,000 tons. From the perspective of production scheduling of new production capacity, except for shaanxi meixin and Inner Mongolia chuangyuan which were normally put into production in January, there was basically no additional input in the first quarter. Then, the domestic electrolytic aluminum production capacity will be less than 36 million tons, a short period of mismatch between supply and demand, will cause the Spring Festival 2019 accumulative range is less than the market expectations. From the point of view of each link of the terminal, the inventory level is very low, if the aluminum price quickly pull up, will drive the downstream replenishment, easy to form a positive feedback.

After the holiday, we will pay attention to the profit redistribution of accumulator and industrial chain

After the festival aluminum market is mainly concerned about two aspects, on the one hand is the height of the Spring Festival accumulator, because the production cut mainly happened in the fourth quarter of last year and the recent extension, the accumulator is expected to be about 400,000 tons, after the festival spot discount range of 150-200 yuan/ton, better than in previous years. On the other hand, the price of bauxite in henan and shanxi has been loosened recently, which is mainly reflected in the release of new mining rights and the relaxation of the marginal mine momentum of environmental protection. Before the Lantern Festival, the mine holiday cannot reflect the increment, and after the festival, the quantity will lower the mine price, and the mine drop is expected to be 50-100 yuan/ton. Current electrolytic aluminium industry profit is poorer. In the case of weak demand, upstream price cuts are easily reflected in the decline in aluminum prices. However, if the expected improvement in demand, in the upstream bauxite, alumina under the pressure of price reduction, this part of the cost will be reflected in the electrolytic aluminum profits. Industry profits need real demand for better repairs, but new capacity will feed back into aluminum prices, which is why we are bearish on prices.

Due to good policy to the landing needs time conduction, before the start of the peak season in March, aluminum prices are expected to remain weak. However, macroscopically and accumulatively better than in previous years, aluminum prices absolutely to the bottom of the price center of gravity will be moved up to 13000-13200 yuan/ton. In terms of the relative price, it is suggested to participate in the operation of buying 1903 air 1907 to earn the income from VAT reduction.