From the point of view of industrial research, the quantitative judgment of the supply and demand of industrial products makes the data of the supply side easier to track. Especially for electrolytic aluminum, once a surplus capacity varieties, before 2017 supply-side growth has become a major concern of the market. However, in the past two years, with the advance of domestic supply-side structural reform and carbon neutrality, the supply-side growth rate has gradually slowed down, and the market focus has shifted more to the impact of policies on the supply side. For the demand side of industrial goods, from the point of view of trade, the expected difference of price fluctuation comes from the judgment of demand. However, in 2019, domestic aluminum ingot demand for the first time negative growth, making for the future of the growth rate of demand began to become difficult to judge. In addition, domestic aluminum demand dropped rapidly from a high level to negative growth in the third quarter of 2021, taking into account the market’s pessimistic expectations for domestic real estate in the first half of next year and the high base effect in the first half of 2020, it has become more difficult to forecast the growth rate of aluminium demand in the supply-demand balance in 2022.

Macroscopical angle, macroscopical angle observes electrolytic aluminium to consume to have two advantage. First of all, the market for the macro-data forecast is relatively adequate, the common expectations are relatively clear. Here we choose CICC for the 2022 quarterly GDP forecast. CICC’s constant price GDP forecast for 2022 is around 5.35% , while current price GDP fell to 6.7% from 9% in the first quarter. In addition, the historical GDP data are relatively less affected by market fluctuations, and reflect the real economy more. Compared with the quarter consumption of electrolytic aluminum since 2003, the fluctuation rhythm is basically the same. Therefore, it is reasonable to understand the change of domestic electrolytic aluminum consumption growth rate from the quarterly change of GDP. First, constant-price GDP and current-price GDP are more closely related to the fluctuation of electrolytic aluminum consumption. The difference between the two is that GDP at current prices takes into account both changes in the price level and changes in the volume of goods. It is expected that the change of domestic electrolytic aluminum consumption growth rate will be influenced by the price expectation, and when the price expectation comes into being, it will affect the downstream terminal or the traders’purchasing and hoarding behavior. For example, when prices continue to fall, downstream terminals will minimize the purchase of raw material stocks, thereby reducing consumption. In addition, judging from the current price GDP year-on-year, in 2022, electrolytic aluminum consumption growth rate is likely to show high before and low sustained decline pattern. This decline is due more to price factors, as GDP in constant prices is relatively stable in 2022. Finally, domestic consumption of electrolytic aluminium fell sharply in 2018-2019, owing to both a sustained decline in volume (7 per cent in the first quarter of 2017 and 5.9 per cent in the third quarter of 2019) and a fall in prices in terms of current-price GDP compared with the same period last year. While domestic consumption is likely to decline in 2022, it will be smaller than in the previous round.

From the point of view of SMM statistics, the change is similar to the apparent demand growth rate. The focus is on the double negative growth in apparent demand, from the second quarter to the third quarter of 2019, and 2021. It’s easy to see why the 2021 has been experiencing negative consumption growth, mainly due to a rapid decline in supply side capacity as a result of electricity rationing. But what about the apparent demand in the second-to-third quarter of 2018 and the second-to-third quarter of 2019 that diverged from the rate of start-up? In the author’s opinion, the main reason is that the start-up rate tracks the demand of primary consumption, and the apparent demand includes both primary consumption and terminal consumption. This may be inferred from the synchronicity of the watch with the aluminum outlet. From the calculation, in the case of supply and inventory given, the export and table should be in an inverse relationship. But aluminum exports and apparent demand in 2018-2020 run in the same direction, mainly because aluminum exports reflect not only the overseas demand for primary processed products, but also the pull role of overseas demand for domestic, this is reflected not only in the primary products, but also in the final products. China’s actual exports, for example, are in line with the pace of aluminum exports. So back to explaining the sharp drop in domestic demand for electrolytic aluminium in 2018-2019. The trade war between China and the United States that began in 2018 not only affected the export of aluminum products, but also the consumption of domestic final products. If only from the point of view of the start-up rate, it is easy to misjudge the growth rate of consumption.

As for aluminium profiles, the year 2018-2019 saw little year-on-year change, with construction profiles experiencing average year-on-year growth of 7 per cent and 2.3 per cent in 2018 and 2019(excluding january-february) . Industrial profiles even kept rising in 2018, so the aluminum profile is not the main reason for the decline in consumption. From the alloy point of view, the 2018-2019 operating rate decline is more obvious, reflecting the terminal mainly for automotive manufacturing. After a sharp decline in 2018, cables began to rise in 2019, mainly reflecting the extreme high voltage at the end of the year, which in turn was associated with increased investment in infrastructure to stabilize the economy in 2019. From the angle of the Strip foil, its performance for 2017 after the high drop, in which the aluminum foil performance is more obvious. Aluminum began to recover in the third quarter of 2019. In addition, it can be observed that the operating rate of the strip had the least impact on the power rationing in 2021, mainly because the aluminum strip accounted for the largest proportion of aluminum exports, accounting for about 50% of aluminum exports. With overseas consumption supporting, the decline in its operating rate is not obvious. From the point of view of terminal consumption, from the point of view of terminal, it is expected that the decline of new construction in 2022 will have no significant impact on the consumption of electrolytic aluminum. Unlike the Ferrous, which is highly sensitive to new construction, the Non-ferrous metal corresponds more to the post real estate cycle. CICC’s projections for new construction are-22% ,-30% , 5.5% and 6.3% growth in the 2022 quarter, respectively, but demand for electrolytic aluminum is more tied to floor space. The current floor space is linked to new construction in 2016. Given the high level of new construction in 2016 and 2017, which means that the completed floor area will drop significantly until at least the end of next year, this also makes electrolytic aluminium consumption at the real estate end not as pessimistic as new construction. Similarly, the low completion rates in 2018 and 2019 reflected the then decline in real estate consumption of aluminum.

Car sales fell sharply in 2018 and 2019, which could explain the slump in primary aluminum consumption. Car Production is expected to show a recovery in 2022 as the lack of a core begins to ease. From the output of white goods, 2018 decline trend is relatively obvious, and the second quarter of 2019 began to rebound steadily, which is consistent with the pick-up in the operating rate of aluminum strip. From the point of view of aluminium for photovoltaic (PV) , about 390,000 tonnes of new aluminium is expected to be added in 2022 as the price of silicon this year has led to significantly lower installation than expected and this is expected to be recouped. However, from the previous installed rhythm, the general rush in the fourth quarter, and 2022 incremental may not fully in line with this law. Demand summary, from the macro, primary processing, terminal three levels of rough analysis of their impact on consumption, the final summary is as follows.

From a terminal point of view, the sharp drop in new housing starts will have a greater impact on Ferrous consumption, and demand for electrolytic aluminium will remain supportive in 2022. In addition, the car, photovoltaic are compensatory growth possibility, so consumption is likely to strengthen in the first half of the year. But given the high base in the first half of 2020, consumption growth is expected to remain largely flat, stabilizing in the first half of next year, recovering slightly in the third quarter and then weakening in the fourth quarter. 

Source: Minmetals Futures, by Luo you