The disturbance of electrolytic aluminum supply has intensified, and domestic aluminum enterprises are facing the risk of shortage of raw materials.

At present, the supply of electrolytic aluminum is also affected by the reduction of electrolytic aluminum production in Europe, the epidemic situation in Guangxi and the reduction of alumina production in northern China. The reduction of electrolytic aluminum production in Europe will affect the supply side by more than 800000 tons in 2022, accounting for 1.2% of the global operating capacity of electrolytic aluminum, and there are still signs of expansion.

According to Shanghai Nonferrous Network data, the Baise epidemic may reduce the local alumina production capacity by 2.2 million tons, while Shanxi, Shandong, Henan and other provinces in northern China have reduced alumina production capacity by more than 15 million tons due to environmental protection and other factors. Domestic electrolytic aluminum enterprises are facing the challenge of shortage of raw materials and rising costs.

The inventory of electrolytic aluminum is less than expected, and the price of aluminum reaches a new high.

As of February 9, 2022, LME aluminum stocks fell to 762000 tonnes, continuing to hit a decade low. LME aluminum prices hit an intraday high of $3236 a tonne on Feb. 8, surpassing the October 2021 high and the highest since 2008.

Since January 2022, the aluminum inventory of the previous period has continued to decline, and there is no accumulation phenomenon in previous years. The social inventory of aluminum ingots increased by 140000 tons during the Spring Festival, which is weaker than in previous years. Under the effect of low inventory, domestic aluminum prices have risen by more than 12% since the beginning of the year.

Domestic demand is getting warmer and aluminum prices are expected to continue to rise.

In 2021, China's exports of aluminum and its products increased to 9.46 million tons, an increase of 16% over the same period last year, a record high. Under the combined effect of the recovery of overseas demand, production reduction of aluminum enterprises and overseas aluminum premium, the high growth trend of domestic aluminum exports in 2022 is expected to continue.

At the same time, under the expectation of steady policy growth, the traditional consumption areas of aluminum, such as construction, automobiles and other areas are expected to pick up.

Aluminum consumption in emerging areas such as new energy vehicles and photovoltaic is expected to maintain a high growth rate of 15% and 20%. In the expectation of demand recovery, the expansion of supply-side disturbances and the effect of low inventory form an effective support for aluminum prices, and the upward trend of aluminum prices is expected to continue.

Copper prices continue to fluctuate at high levels, and copper prices still have the potential to rise under the prospect of improved demand.

Copper prices are currently subject to liquidity tightening, high inflation, dollar index fluctuations, low inventory of multiple factors, showing a volatile trend since the beginning of the year. Judging from every cycle of Fed interest rate hikes in history, copper prices have risen, and we judge that with the expected landing of phased monetary policy, the disturbance to copper prices is expected to weaken.

On February 9, 2022, LME copper inventory fell to 77300 tons, continuing the de-stocking trend. As consumption strengthens after the Spring Festival, the effect of low inventory is expected to catalyze the rise in copper prices. Taking into account the copper plate related companies are expected to increase production in 2022, profit growth is expected.

Risk factors: weaker downstream demand suppresses metal prices, higher-than-expected growth in new capacity, and the risk of changes in Fed interest rate policy.

Investment strategy:

Affected by supply disruptions and low inventory effects, international aluminum prices hit a new high since 2008, pushing the aluminum sector to rebound strongly. We judge that the disturbance on the supply side of aluminum can not be alleviated in the short term, and the demand side is expected to pick up in the context of export improvement and steady growth, and the rising trend of aluminum price is expected to continue.

Under the low inventory effect, copper prices are expected to return to the upward trend with the expected landing of phased monetary policy, and the upward breakthrough in prices is expected to lead to a rebound in the plate. Recommend the elastic target for the price increase of electrolytic aluminum and the target for copper mine with growth. Recommend cloud aluminum shares, Shenhuo shares, Zijin Mining Group and China Molybdenum, and suggest paying attention to Aluminum Corporation Of China Ltd and China Nonferrous Mining.