Discussion on the reason why the price of aluminum ingot is fluctuating downward

It can be seen from the annual average price chart of aluminum ingot in East China quoted by China Aluminum that the price of aluminum ingot in 2022 is in a downward trend of shock, and it is expected that the short-term aluminum price will remain in a volatile market in the future. The reasons are divided into the following three points:

First, China dominates the global supply of electrolytic aluminum, and its output remains high.

China is the largest producer of electrolytic aluminum in the world. According to IAI data, in 2021, the global output of electrolytic aluminum was 67.34 million tons, and that of China was 38.92 million tons, accounting for 58% of the global output. Since 2002, the global increment of electrolytic aluminum has basically come from China, especially in the past five years, the increment of electrolytic aluminum in China has contributed more than 90% of the global increment.

Second, the external strength is weak, and the import window is closed, which leads to the price increase of raw materials for electrolytic aluminum.

Since October, 2021, the price of Lun aluminum has been higher than that of Yangtze nonferrous aluminum ingot, and the import window has been closed continuously. Imported primary aluminum is an important supplement to domestic aluminum ingot supply, with 1.06 million tons imported in 2020 and 1.57 million tons imported in 2021. Under the pattern of external strength and internal weakness, the import window is closed and the export channel is opened. According to customs data, from January to February, domestic primary aluminum imports were 56,800 tons, down 77% year-on-year. According to Aladdin's forecast, the import of aluminum ingots will be around 800,000 tons in 2022, which is half of the previous year.

Third, bauxite imports have increased substantially, and alumina production capacity is surplus.

 Bauxite: Bauxite previously distributed overseas by domestic enterprises began to be produced. In recent years, the import volume of bauxite has increased rapidly, which has become the main factor to reduce the domestic bauxite price. Alumina: The production capacity is high. The domestic alumina production capacity is 88.52 million tons, and the utilization rate of the production capacity is only 81%. It is expected that there will be 9 million tons of new production capacity this year. On the demand side, the ceiling of electrolytic aluminum production capacity was established after the supply-side reform, which led to the suppression of alumina demand. According to the calculation of the capacity ceiling of 45 million tons of electrolytic aluminum in the future, the domestic demand is at most 87.3 million tons of alumina, and the existing production capacity is already oversupplied, which leads to the profit of alumina link can only be guaranteed or lost.