Transcript Global aluminum capacity Global aluminum capacity

The Analysis and Outlook for
Aluminum Price
光大期货 研究团队
May, 2015, Qingdao
Nonferrous Metals Research Team of
Everbright Futures
Content
1.Macro-economic factors
2. Fundamentals
3. Market Game
4. Conclusions
p2
Part one: Macro-economic factors
p3
The economy in EU-U.S. is tepid.
p4
China’s economy becomes weak and the
stimulation is strengthened.
p5
The U.S. capital market has entered adjustment
period.
• The 10-year treasury yield has
stopped falling and stabilized.
• Dow Jones Index shocks at the
higher level.
• The dollar index has began to
adjust.
p6
Part two: Fundamentals
p7
The growth of global aluminum capacity is ahead of
that of aluminum production for one year.
(Coefficient of
association)
Global aluminum
capacity
Global aluminum capacity
(Ahead for one year)
Global aluminum
production
0.34
0.49
p8
The aluminum price is ahead of the utilization of
global aluminum capacity for two months.
(Coefficient of
association)
LME Aluminum
Price
Ahead for two
months
Ahead for one
month
Capacity
Utilization
0.74
0.85
0.81
p9
Supply summary

The growth of global aluminum capacity is ahead of that of production
for one year. The global aluminum capacity expanded gradually in Q2,
Q3 and Q4 of 2014, therefore, the production in Q2, Q3 and Q4 of 2015
will increase gradually and significantly as well;

The global aluminum price is ahead of utilization of aluminum capacity
for two months, although the aluminum price was low in Q1, as the cost
was reduced, the utilization of aluminum capacity has remained increase
slightly in Q2, and it may continue to keep in the higher level in Q3.

The global aluminum production in Q2 will see pick up and the supply
pressure in Q3 will be heavier than that in Q2.
p 10
The growth of aluminum consumption is closely
related with the growth of GDP and IP.
(Coefficient of association)
GDP
IP
Aluminum consumption growth in the U.S.
0.90
0.91
Aluminum consumption growth in China
0.69
0.77
Fixed-asset investment
(Lagging for three quarters)
0.41
p 11
The distribution of downstream demand for
aluminum
p 12
The coefficient of association between China real estate index
and aluminum consumption growth
p 13
The relation between China real estate index and
aluminum consumption growth
p 14
The influence of automobile and transportation equipment
manufacturing industry on aluminum consumption
p 15
Other influencing factors on the demand for
traditional aluminum
√
Corporate
liquidity
Downstream
orders
Demand
in
China
×
Corporate
profit
Outlook for
aluminum
price
×
？
p 16
Demand Summary
 Both the cement output data and the real estate sales data
show that the growth of aluminum consumption in Q2 and
Q3 is hard to speed up significantly;
 The tense liquidity and low profits of downstream
enterprises will continue within 2015;
 Most enterprises hold negative attitudes on outlook for
aluminum price;
 The demand in Q2 sees improvement compared with that in
Q1, but it has not reached the level of peak season. It is
expected that the demand in Q3 may be even weaker.
p 17
Part three: Market game
p 18
Stable equilibrium and unstable equilibrium
Unstable equilibrium
Stable
equilibrium
p 19
The analysis of market game
First: Prices can adversely affect the action of market
participants while the action of market participants will affect
the prices as well.
Aluminum
Equilibrium
price
state
High
Unstable
Medium
Sub-stable
Supplier 1
Supplier 2
Full production, selling off spot
Full production, selling off spot
inventory and short futures hedge.
inventory and short futures hedge.
Continuing to produce and hold spot
Continuing to produce, accelerating
inventory and rare futures hedges.
inventory turnover and rare futures
hedges.
Low
Stable
Significantly reducing production and
Significantly reducing production and
no futures hedge.
no futures hedge.
p 20
Analysis of market game
High
Medium
Low
p 21
Analysis of market game
Second:
Some smart participants from large companies can foresee the
“First” situation, the aluminum price of high level will lead to
unstable equilibrium and short positions in the market will
increase significantly.
Pushing the aluminum price to the high level equals to helping
others and making contribution for other colleagues of this
industry.
Therefore, keeping the aluminum price at the medium level is
favorable to both maintaining the balance and guaranteeing
self-interest.
p 22
Analysis of market game
Third:
A small part of smart participants can not only foresee the
“First” situation, but also they have analyzed the “Second”
situation.
Therefore, these participants will have a two-track plan, on
the one hand, appropriate short selling at the mid-high level
of aluminum price; on the other hand, when the price
increases sharply, these participants will intensify hedging
decisively according to their own profit situations to lock the
enterprises’ profits over a period of time in the future.
Fourth, Fifth ……………
p 23
Part four: Conclusion
p 24
Conclusion
 The supply of aluminum in Q2 of 2015 is slightly over
surplus, but the supply in spot market is a little tighter due to
some suppliers being reluctant to sell out, and the aluminum
price remains firm;
 The market supply will see upward gradually in H2 of 2015
and demand is expected to improve hardly, therefore, the
supply will see severe surplus when compared with Q2, it is
hard for suppliers to absorb the surplus inventory and the
aluminum price is likely to shock to the weaker level;
 The cost reduction will lead to the falling of aluminum price
for H2 in 2015.
p 25
Market is right for most of the time;
But sometimes it makes mistakes.
Seize the chance to make right decisions when it
makes mistakes.
p 26
Thank you!
•
•
•
•
•
Everbright Futures Research Institution Maili Xu
Qualification Certificate No. : F0292919
Investment Consultation Certificate No.: Z0000609
Tel.: 15902177850
E-mail: [email protected]
p 27
Disclaimer
The information of this report is based on the public data, we do not
guarantee the accuracy and integrity, nor do we guarantee any change of the
information. We have tried to make it objective and impartial, but the opinion,
conclusion and suggestion are all for your reference. The opinion and
information cannot form the operating basis for the stated product; any
investment decision made by the investors has nothing to do with our company
and the author.
p 28
p 29