2018 domestic electrolytic aluminium enterprises face the industry once again the plight of loss, high aluminum ingots inventory flow field, bauxite resources severely depleted, completed in 2018, the real estate area is cooled, 2019 aluminium market consumption in the construction field can be improved, the inventory if the situation is still grim, demand of alumina, aluminium prices can usher in the development of new opportunities?

Bauxite imports will become the trend

In recent years, fast development of alumina industry in China, this is not much bauxite resources began to appear stretched, henan, shanxi and other places, in particular, began to appear serious dilution bauxite resources, even dry up, companies began to use of low grade ore, lead to sharp increase in production costs, some companies even miles to the procurement of bauxite in guizhou.

It will become a trend for Chinese alumina enterprises to utilize overseas bauxite resources. The production capacity of bauxite resources and alumina in China is seriously asymmetric. The guarantee capacity of bauxite resources is less than 10 years. At the same time, the quality of domestic ores is obviously declining, which increases the production cost of alumina.

Alumina: shortage to surplus

The alumina market is in short supply in 2018 due to third party supply disruptions and other factors in Brazil. China's total alumina production in 2018 was 70.479,000 tons, up 3.01 percent year-on-year, according to SMM data.

Alcoa expects a surplus in China's alumina production in 2019, driven mainly by refinery expansion, while economic and environmental factors have led to lower smelting output than previously expected. Outside China, the market is expected to be roughly balanced due to expansion of smelting operations and increased demand.

The us Treasury recently lifted sanctions on OlegDeripaska's Rusal, which also owns the UK's Aughinish alumina plant. The plant accounts for a third of the total production of alumina in Europe.

In early March 2018, a Brazilian regulator ordered Norsk Hydro to halve the capacity of its Alunorte alumina smelter in Brazil until it complied with an environmental protection decree, but news of the change in its actual production cuts shifted multiple times over the course of a year. On October 3 last year, hydro announced that its alumina plant in Brazil was ready to stop operation. However, on January 16, 2019, the environmental protection agency of Para state issued a technical statement proving that hydro Brazil's Alunorte alumina plant was ready to resume production safely. This year there is still the possibility of a resumption of production, if the resumption of production plans, will accelerate the global alumina overcapacity.

2018 electrolytic aluminum production growth decline in 2019 inventory situation is still serious

In 2018, affected by supply-side reform and the policy of heating season, the growth rate of electrolytic aluminum output declines, and the growth rate of overall consumption exceeds the growth rate of supply, thus contributing to the destocking situation. According to SMM data, China's electrolytic aluminum production increased by 3.9% in 2016 and 14.2% in 2017. In 2018 due to the production scale and new capacity on the early speed is lower than expected, prices for domestic electrolytic aluminum production growth of 0.4%, by a electrolytic aluminum and aluminum ingots can be seen below the stock is still on the high side, so unless under the aluminum consumption trend of more than expected, greatly to inventory to achieve, or 2019 aluminum high inventories will become the new normal.

Terminal - an overview of the aluminium consumption market in the construction sector

Aluminium consumption in China's construction sector fell 2.18 per cent year-on-year to 9.27 million tonnes in 2018. 2018 was completed in China's real estate area in cold for a year, according to the national bureau of statistics data show that first ten months of 2018, China's real estate industry building complete area of 574 million square meters, fell 12.52%, according to the SMM know, there are two reasons, one is the first time at the end of last year began to shutdown for heating season, this year (2018) heating season limit production areas of real estate project how to return to work after March 15, was forced to delay the construction period; Second, in the context of deleveraging and liquidity tightening, real estate developers are particularly tight this year. Some developers have expressed to SMM that in order to delay the payment of project funds, they may take the initiative to delay the construction period. In addition to the real estate sector, the rural self-built housing market and shantytown reconstruction plate demand has shrunk this year. However, from the construction area and new construction area of the real estate in the past two years, the completed area is expected to be improved in 2019. We estimate that the aluminum consumption in the construction sector will be around 9.47 million tons in 2019.

The development of recycled aluminum welcomes important opportunities

Most of China's renewable aluminum enterprises are small in scale. It is estimated that there were about 1,000 renewable aluminum enterprises in China in 2014, mainly private and foreign-funded (joint venture) enterprises, with a high degree of marketization and competition intensity. Due to the high homogenization of recycled aluminum products in China, the main competitive factor among recycled aluminum enterprises is price. With the intensification of market competition and the further standardization of the industry, some small enterprises have been eliminated, and the market concentration of China's renewable aluminum enterprises has been improved.

Due to domestic aluminium scrap of social ownership relative insufficiency, the relative shortage of supply, the opportunity cost of aluminium scrap and the characteristics of accounting cost has not been reflected in the price of aluminium scrap material, aluminium scrap prices also have a big drop in space, as the buildings, automobiles, machinery and equipment scrap cycle each shipment arrival, the rapidly increasing social ownership of aluminium scrap, aluminium scrap supply and demand once the inversion, the prices will gradually open space. Secondary aluminum production enterprises the main raw material market is a seller's market, subject to the aluminium scrap materials are in short supply relative, recycled aluminum enterprises is limited by a certain degree of production and operation scale, however, with adequate supplies of buyer's market, scrap aluminum material supply increases, prices fall, recycled aluminum production scale of enterprises is expected to grow.

There is still a big gap between China's consumption of recycled aluminum and that of developed countries. Among them, recycled aluminum in the field of transportation has a difference of more than 20%, and recycled aluminum for packaging has a difference of more than 10% (recycling and recycling of cans is almost zero). Therefore, China's recycled aluminum consumption market has greater room for improvement, is an important opportunity for the development of recycled aluminum.