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COMEX October 19th Copper Review

New York, October 19 news, COMEX copper prices rebounded on Friday, after the Chinese Vice Premier Liu He and the leaders of the two delegations concentrated their calls to soothe the market anxiety.

COMEX October copper futures contract rose 0.0305 US dollars, or 1.1%, to close at 2.7680 US dollars per pound, ending the five-day decline.

The most active December contract rose $0.0315 to close at $2.7780 per pound.

Concerns about the weakening demand for raw materials commonly used in construction and manufacturing around China’s economic slowdown and trade disputes have dragged down copper prices by more than 16% from the four-year highs mentioned in June.

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China’s National Bureau of Statistics announced on Friday that China’s GDP in the third quarter increased by 6.5% year-on-year, the growth rate fell to a nine-and-a-half-year low, and the industry weakened. The investment in infrastructure and manufacturing industries dragged down the growth rate of overall fixed asset investment, and consumption did not show any significant improvement.

Chinese Vice Premier Liu He said on Friday that the recent stock market volatility and decline were caused by many factors. The bubble has been greatly reduced. It can be said that the adjustment and clearing of the stock market is creating good investment opportunities for long-term healthy development. Meanwhile, China The government will deepen reform and opening up and there is no reason not to have full confidence in the broad prospects for China’s economic development.

China’s “one line and two meetings” high-level attitudes have eased market tensions. The central bank governor Yi Gang said that the recent stock market volatility is mainly affected by investor expectations and sentiment. Overall, the current stock market valuation has been at a historically low level, which is in contrast to China’s stable economic fundamentals. The central bank is also studying the introduction of targeted measures to alleviate corporate financing difficulties.

Liu Shiyu, Chairman of the China Securities Regulatory Commission, and Guo Shuqing, Chairman of the China Insurance Regulatory Commission, will continue to express a number of measures to stabilize stock market confidence in the morning, including the CSRC’s encouragement of local governments to manage various funds, qualified private equity funds, and brokerage products, respectively. The new fund will help listed companies with development prospects but temporarily fall into operational difficulties to solve the stock pledge dilemma; the China Insurance Regulatory Commission will allow insurance products to set up special products to participate in the liquidity risk of listed companies’ stock pledge.

Benefiting from the Chinese Vice Premier Liu He and the leaders of the two delegations, the stock market uneasiness eased slightly. The Shanghai Composite Index closed up 2.6% on Friday, the biggest one-day gain in nearly two and a half months. The Shanghai and Shenzhen 300 Index rose 2.97%.

The base metals market has also been boosted.

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A senior analyst at Macquarie Bank said that infrastructure construction data and strong construction start-ups are positive for the market.

Copper prices are often fluctuated by the market’s impact on China’s economic growth, with China accounting for about 50% of global copper demand. Copper prices were dominated by macro market volatility this week.

Investors have become increasingly uneasy in recent weeks due to factors such as rising US Treasury yields, trade war concerns and global economic growth.

Analysts at Commerzbank said in a report that the slowdown in China’s economic growth reflects that “trade disputes with the United States may begin to have an impact.”

Libyan oil industry

According to BP statistics, as of the end of 2017, Libya has proven oil reserves of approximately 48.4 billion barrels, making it the world’s tenth largest oil reserve.

Since 2013, there have been no new oil reserves in the country. Based on production in August 2018, the country’s storage-to-production ratio is about 137 years.

Looking at the history of oil production in Libya, it can be found that its oil production is often fluctuated by external factors. In the 1960s, Libya entered the golden decade due to the release of oil exports, and its output reached a historical peak in 1970, with an average daily production of 3.32 million barrels. Libya joined OPEC in 1962.

The blazing period of the development of the Libyan oil industry is also accompanied by frequent wars in the Middle East. In 1973, the fourth war broke out in the Middle East, and Libyan oil production plummeted to half a million to 1.52 million barrels per day. Subsequently, Libyan oil production entered a relatively stable period.

In 2011, Libya’s civil war broke out, and oil production fell from nearly 1.6 million barrels per day at the end of 2010 to 100,000 barrels per day in September 2011, a cumulative decline of nearly 94%, and production activities almost all stopped. With the fall of Gaddafi and the calming of the civil war, Libya’s oil industry has a short-lived breathing opportunity, and production has quickly returned to pre-war levels. However, due to the unstable political situation in the country and social unrest, oil production fell sharply again in 2013. .

Up to now, although the overall oil production in Libya has improved significantly, the internal disturbances continue to interfere intermittently with production activities. From 2017 to 2018, the peak output is basically at the level of 1 million barrels per day.

In view of the social unrest in Libya and the complex and unstable political situation, OPEC did not restrict Libyan oil production in the production reduction agreement reached at the end of 2016. The exempted countries that reduced production also include Nigeria. By the end of 2017, with the recovery of Libya’s output, OPEC unanimously decided to call on Libya and Nigeria to control the total output below 2.8 million barrels per day, including 1 million barrels per day in Libya and 1.8 million barrels per day in Nigeria, but not made hard limit.

B resource reserves are huge

Libya’s current distribution of petroleum resources can be broadly divided into east and west regions. The eastern area is located in the inland area south of the Sirte Bay. The overall characteristics are east-west distribution. The oil fields are mainly concentrated in the three provinces of Ajdabiya, Jufra and Sirte; the western part is distributed in the north-south direction, and the oil fields are mainly concentrated in Obari and Gaelyan provinces.

In addition, in addition to the onshore oilfield, Libya has two offshore oil producing areas in the offshore waters of the northwest, namely Al Jurf and Bouri. The oil produced in the above two producing areas is mainly medium quality, of which Bouri has a high sulfur content of about 1.79%; Al Jurf has a low sulfur content of about 0.19%. Al Jurf, which is also a medium crude oil, is lighter than Bouri and has a lower sulfur content, so it is also higher in value than Bouri.

In general, the quality of oil produced in the onshore oilfield is better than that of offshore offshore oilfields. Except for the petroleum produced by Messla, which is light sulfur, the rest of the oil produced is light and low sulfur, and the API degree is between 36.1 and 60. The sulfur content is between 0.04 and 0.4, including ultra-light Mellitah condensate.

Among the major oil fields in Libya, except for the Nakhla and As Sarah fields, which are operated by BASF’s subsidiary Wintershall, the remaining oil fields are managed by the Libyan National Oil Company (NOC). The Saari, Messla and Hamad fields in the west are fully managed by AGOCO. AGOCO is a wholly-owned subsidiary of NOC, and Waha, Harouje, Akakus, Mellitah, and Mabruk are joint venture subsidiaries of NOC. The El Sharara field is the largest single oil field in Libya with a capacity of approximately 300,000 barrels per day.

There are mainly seven key oil export ports in Libya, the largest of which is Es-Sider, with a daily export capacity of 337,000 barrels, followed by Ras Lanuf, Zawiya and Zueita, with an average daily throughput of 220,000 barrels and 200,000 respectively. Bucket, 200,000 barrels.

C export volume is highly correlated with production activity

Libya’s domestic demand for oil is relatively small, and it is basically self-sufficient and therefore a net exporting country.

According to EIA data, the peak domestic demand appeared in 2009, with an average daily consumption of about 310,000 barrels. As of 2014, Libyan oil consumption was about 260,000 barrels per day, most of which was used in refinery raw materials. There are 5 refineries in Libya, all of which are state-run, with a total disposable processing capacity of 378,000 barrels per day. The El Brega refinery in the eastern part of Ras Lanuf has been shut down since April 2017 due to technical problems with the distillation tower. The repair time has not yet been determined.

Libya’s tiny domestic demand means that most of the production needs to be digested through exports. At the same time, the oil industry is the country’s largest pillar of GDP. According to OPEC data, the industry accounts for about 60% of the national GDP and is 80% of the source of export revenue.

Libya’s oil exports are highly correlated with its production activities. With the recovery of production, the country’s oil exports have increased significantly since 2016. The average daily export volume in 2017 was 725,000 barrels, an increase of 425,000 barrels per year, 2018. The average daily export volume is 890,000 barrels, an increase of 165,000 barrels.

By region, Europe is undoubtedly the most important export market in Libya. In 2018, Europe imported an average of 620,000 barrels of oil per day from Libya. Among them, southern Europe and Northwest Europe imported the most, with an average daily import of 466,000 barrels and 144,000 barrels. Asia is the second largest market, with an average daily import of 215,000 barrels, including an average daily import of 150,000 barrels in East Asia. In addition to Europe and Asia, the markets of North Africa, Latin America and North America are all traces of Zambian oil.

According to the country, Italy, Spain, China and France are the top four buyers of Libyan oil. Since 2018, they have imported 300,000 barrels per day, 126,000 barrels per day, 124,000 barrels per day, and 96,000 barrels per day. On the day, the proportion was 33.7%, 14.2%, 13.9%, and 10.7%, respectively. Italy has a certain degree of participation in the Libyan oil industry, and Eni Energy Group in the country has signed a production sharing agreement (PSA) in El Feel and Bouri to obtain a share of the oil supply of the above two fields. In addition, the group and Libya jointly built a submarine pipeline connecting the northwestern coast of Libya with Sicily, Italy, but this pipeline is only responsible for natural gas transportation.

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Most of the oil exported from Libya is high-quality light and low-sulfur crude oil produced from onshore oil fields, and the remaining oil exports average only 64,000 barrels per day. Among them, medium-quality oils are mainly exported to Italy and Spain. China imports light crude oil from Libya, of which light high-sulfur crude oil accounts for only 1.9%, and the rest are all light and low-sulfur crude oil. Sinochem, Sinopec and PetroChina are major buyers, and CNOOC has a small amount of purchases.

D is less likely to increase steadily

Since the civil war in 2011, Libya has not achieved the peace in its own country. In fact, its political situation has become more complicated than ever. Not only have the domestic government split into two major factions, but also a large number of anti-government armed forces have emerged. These armed forces are also divided into various factions, each representing their own interests and goals, plus the horror of invasion from the southwest. The forces of the country have caused the country’s oil to fall into an extremely harsh production environment. Although it has nearly 50 billion barrels of natural oil resources, it is difficult to put into production in a planned and effective manner.

Due to the small amount of domestic consumption, most of the oil produced is exported to overseas for consumption, and oil exports have become the first pillar of the Libyan economy. Infrastructure, including pipelines and ports, has been able to meet the current industrial needs of nearly 1 million barrels per day. The most significant problem is the disruption or destruction of facilities caused by armed conflict.

Libya’s oil supply is mainly for the European market, so the impact of sudden factors on the price of Brent crude oil is more obvious. Under the influence of these factors, the price of WTI crude oil in the west is mainly due to the reasonable price difference between the arbitrage mechanism and Brent crude oil. In addition, since the country’s oil exports are mainly light, low-sulfur crude oil, when the supply is reduced or interrupted, the availability of related oils in the physical market is reduced, and the corresponding price will also rise.

In the short-term, due to the harsh production environment, Libya’s oil production is unlikely to increase steadily. Intermittent supply will be blocked. Superimposed OPEC limits on production, and its chances of continuing downward pressure on international oil prices are small. Fluctuation is the main line.

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Indian aluminum companies acquire US Aili Aluminum, causing concern in China’s domestic industry

A stone provoked a thousand waves. On October 10, just after the National Day holiday, a M&A transaction case that could affect the global aluminum processing industry has become the focus of the industry.

“Daily Economic News” reporter asked the National Anti-Monopoly Bureau website found that Novelis, the world’s largest auto sheet manufacturer, acquired Aleris, the world’s leading aerospace board manufacturer, and passed China’s anti-monopoly review. : In the column “Public Cases for Simple Cases of Operators”, Novelis’ acquisition of the equity of Aili Company is listed. Some industry veterans said that once the acquisition is completed, the combined capacity of the two companies will reach 1.2 million tons per year, while the global demand for automotive sheets will be around 1.3 million tons in 2017. The combined companies will occupy the global car. A large share of the board market.

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This is undoubtedly a major event in the industry, but there are also different voices. An industry insider expressed doubts to reporters: Why does this type of M&A transaction take a simplified anti-monopoly approval process with a “simple case”?

Chinese companies have wanted to acquire Aleris

The reason why this transaction is very popular is also due to the industry status of Aleris. As the world’s leading R&D manufacturer of high-end aluminum rolling products, the company is not only the largest supplier of Airbus, but also a long-term partner of aircraft manufacturers such as Boeing and Bombardier. Its customers include Audi, BMW and Mercedes.

Speaking of Aili Aluminum, in fact, China’s aluminum enterprises are the first to throw the “Olive Branch”. As early as August 29, 2016, Zhongwang Group, a leading aluminum processing company in China, announced that it had acquired the entire shareholding of Aleris through US$2.33 billion through Zhongwang US, which is also the largest overseas acquisition in the history of aluminum processing in China.

As the world’s second largest and Asia’s largest manufacturer and manufacturer of industrial aluminum extrusion products, Zhongwang Group and Aleris are highly complementary in terms of products, markets and technology.

Sean Stack, then president and CEO of Aleris, has repeatedly stated that he is very welcome and looking forward to the merger: “We are very excited about this strategic equity shift, which will prompt us to accelerate the pace of strategic capacity expansion. ”

However, the original “win-and-sell” “buy” is full of resistance. According to the Securities Times, the deal was opposed by some US senators and was not completed. In November 2017, Zhongwang US and Aleris announced the termination of the merger.

Just after the Chinese company’s merger and acquisition of Aleris was forced to terminate, India Aluminum Industry Corporation followed suit to launch the acquisition of Aleris. In January 2018, China Nonferrous Metals reported that India Industrial Aluminum Corporation plans to participate in the auction of Aleris. On July 26, Inaluminium Industries announced on its subsidiary, Novelis, that Novelis will acquire Aleris for $2.6 billion. On September 30, Novelis’s acquisition of the Aleris shareholding case was publicized on the official website of the China Anti-Monopoly Bureau, with a public notice period of 10 days.

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M&A will affect the global aluminum processing industry pattern?

According to the “Guiding Opinions on the Application of Simple Cases for Concentration of Operators (Trial)” issued by the Ministry of Commerce of the People’s Republic of China, “in the same relevant market, the sum of the market share of all participating operators is less than 15%” “.

According to the public information, the “aluminum strip products” of Novelis and Aleris have a share of 0~5% in the Chinese market, and the sum is less than 15%, which is the reason for applying for a simple case of China’s anti-monopoly approval.

“Noblelis declares that the relevant commodity market and its market share do not comply with industry rules.” For the above situation, an industry insider said, “’Aluminum strip’ is a very broad concept, including automotive panels, aviation panels, tanks. Materials, marine boards, building boards, aluminum alloy strips for high-speed rail, etc. According to industry practice, aluminum sheets need to be subdivided according to application purposes (such as automobiles, aviation, tanks, etc.), and cannot be declared as ‘aluminum sheets’ in general terms. band’.”

The industry further explained that the aluminum sheet materials used in different terminal products have significant differences in production processes and technical parameters. For example, automotive panels require a certain degree of strength and elongation, long process flow, narrow process window, and high precision requirements for equipment. Therefore, automotive panels are high-precision products of aluminum strips. Currently, only a few aluminum processing companies in the world can produce.

According to industry veterans, if you look at the segment of the automotive panel, the Novelis family is already big. According to incomplete statistics, the current production capacity of Nobelis’s automotive panels exceeds 800,000 tons, and the production capacity of Aili Aluminum’s automotive panels is about 400,000 tons. In 2017, the global demand for automotive panels is about 1.3 million tons, of which Novelis is global. The automotive market already has a market share of over 50%. In China, the annual demand for aluminum sheets for automobiles is about 260,000 tons. The combined market share of Novelis and Aleris is more than 50%, especially for new models. The two sides of the transaction account for the dominant position in the Chinese market.

Then, after the merger of Novelis and Aleris, will the global aluminum processing industry structure change?

“The merger of the two companies will create a ‘big Mac’ in the automotive and aerospace sector, which will not only affect the full competition in the global market, but will also have a huge impact on the Chinese aviation board and automotive panel industry.” According to senior experts, judging from the development trend of the global aluminum processing industry, the core of the future game is concentrated on high value-added aerospace boards and automotive boards. At present, a number of aluminum processing enterprises in China are also making great efforts to enter this field, including Southwest Aluminum, Northeast Light Alloy, Nanshan Group, Liaoning Zhongwang Group, South-South Aluminum and other enterprises. In recent years, they have invested a lot of money. Manpower and material resources to build aviation board and automobile board production lines, but enterprises still need time to accumulate technology, achieve batch stable production and obtain certification of supply qualification. At this stage, domestic related industries are still in the cultivation stage. Nobelis and Aili Aluminum are one of the two, and the development space of China’s aluminum processing industry may be hindered.

“In any case, Novelis’ acquisition of Aleris has a huge impact on China’s aluminum processing industry,” said an aluminum processing company executive.

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On September 27, the domestic methanol market rose and fell simultaneously

First, the price trend

According to the price monitoring of the business community, as of September 27, the average domestic methanol market price was 3,273 yuan / ton, the overall market conditions rose and fell between regions, the price increased by 19.39% over the same period last year.

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Second, the market analysis

Products: The domestic methanol market continues the regional market, both ups and downs are reflected. Among them, the port was down by the sharp decline in futures, with a decrease of 30-70 yuan/ton. At the end of the month, the import and arrival of goods was relatively concentrated, and it is necessary to pay attention to the expected changes in inventory in recent days. The market in each region of the Mainland is adjusted accordingly according to its own supply and demand. For example, after the price cut in Guanzhong, the shipments have improved, the demand for storage in Inner Mongolia has been slightly lowered, the replenishment in Shandong has increased, and the supply and demand in the southwest has been rising and falling. The situation of mutual emergence; and the tight transportation capacity before and after the holiday, it is expected that the short-term market will continue to be differentiated. On September 25, the central bank issued a notice saying that taking into account the fiscal expenditure at the end of the quarter and the withdrawal of statutory deposit reserves by financial institutions may partially hedge the impact of the central bank’s reverse repurchase and government bond issuance, etc., in order to maintain the flow of the banking system. The reason was reasonable and sufficient. On the same day, the People’s Bank of China launched a 60 billion yuan reverse repurchase operation by means of interest rate bidding.

Industry chain: Formaldehyde: Shandong formaldehyde trading atmosphere appears in general, the market just needs to be shipped mainly; now formaldehyde is more volatile with raw material methanol market. At present, Linyi area concentrates 1,600 yuan / ton; Zibo and surrounding areas are 1620-1680 yuan / ton, slightly higher turnover. Acetic acid: The domestic glacial acetic acid market has risen sharply. The market continued to be tight, and some enterprises had difficulty in submitting orders, and there was a large supply gap. And some devices still have maintenance plans in the later period. Therefore, short-term stock-outs are difficult to alleviate. Therefore, the supplier is reluctant to sell and limited sales, and the offer has been raised significantly. DME: end-user every rose centralized procurement market, the DME market once again showing short supply situation, the overall domestic cumulative increase 50-150 yuan / ton, the mainstream short-term trend is expected to continue.

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Third, the market outlook

On the positive side, domestic supply: the fourth quarter coking production limit, natural gas supply and other news support, and the northwest part of the equipment is still under maintenance, local supply is acceptable; foreign supply: international local methanol plant operating load, such as Southeast Asia, Russia, In addition, some installations in Indonesia still have maintenance plans, and the international supply pressure is not large. Transportation: Before and after the two festivals, the capacity of domestic transportation is tight, and the freight rate will be relatively high, which will support the cost of the land. End: In the winter, the natural gas supply factor is affected, and the local industrial gas price is raised. The cost of the gas project in Sichuan and Chongqing has increased from the previous period. Negative, traditional demand: Under environmental supervision, the downstream plate production in Shandong and Hebei areas is limited, affecting the demand for formaldehyde resources, and the raw materials are relatively high, and some downstream cost pressures remain; emerging demand: since mid-September, Henan The MTO projects in Shandong and the northwest have been slightly reduced, which is unfavorable for the digestion of local raw materials. At present, the industry starts to fall below 70% and needs to be closely watched; futures: futures with thread, PP and plastics are falling simultaneously, the players The mentality is formed with a certain pressure;Supply side: At present, some maintenance projects in Henan and Shandong have resumed work, focusing on the impact of subsequent incremental impacts in the corresponding areas; in addition, the current new methanol projects in Iran and the United States have been put into production, and it is necessary to closely monitor the impact of subsequent inflows into domestic increments/extrusion; Holiday factors: Near the eleventh holiday, based on the tight transportation capacity and the end of the stocking, the demand for lowering the local mainland enterprises, such as Guanzhong and Inner Mongolia. The methanol analyst of the business community expects that the methanol market will fluctuate and consolidate in the short term.

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Looking at alumina supply from overseas manufacturers

Report summary:

Since March, the operation of aluminum overseas manufacturers has repeatedly become the focus of the market. The normal operation of Hydro, Rusal and Alcoa was interrupted, causing different price shocks to the market. Since August, in the case of Hydro’s production cuts and RUSAL sanctions continued, and Alcoa’s sudden strike, alumina prices soared and continued to maintain net exports. However, the high production profit stimulation of overseas manufacturers and the new capacity in the long-term can not be underestimated. Domestic manufacturers have disadvantages such as cost and policy. The net export of alumina is difficult to maintain for a long time, and the cost hype caused by alumina is also Unsustainable, for Shanghai Aluminum, the cost is more back to the bottom support.

Since March, the alumina export window has continued to open. According to customs data, from January to July 2018, alumina exports totaled 346,600 tons, an increase of 1034.4% over the previous year. In the case of relatively tight domestic supply, exports are still sustainable, indicating that the shortage of alumina in the international market is even worse. There are even some opinions in the market that China may become a net exporter of alumina in the long run. Can the net export of alumina be maintained? Is the shortage of alumina in the international market continuing? Based on the international supply side of alumina, this paper will make a reasonable prediction of the future supply of alumina in the world by analyzing the operation of major international aluminum giants.

1. The production of the overseas Big Three is limited, and the supply of alumina in the international market is tight.

In the past two months, in the case of a shortage of domestic ore supply and high bauxite prices, the cost has pushed the price of domestic alumina to remain high. At the same time, overseas alumina prices have continued to rise, and the average price of port alumina FOB is 8 The monthly climb climbed to 640 US dollars, and the widening of the internal and external spreads has also become an important factor in stimulating the upward movement of alumina. The shortage of alumina in the early stage of the overseas market is inseparable from the production dynamics of major international alumina producers:

First, Hydro’s production cuts are still going on. Since February, Hydro’s alumina plant in Argentina, Alunorte, was ordered by the Brazilian government to cut production by 50% due to environmental problems. Hydro and the Brazilian government have been in the process of negotiating tug-of-war. According to Hydro’s second quarter report, the recovery time of the capacity has not yet been determined. From the quarterly report released by Hydro, it was observed that its alumina output in the first quarter was 1.277 million tons, down 12% from the previous year; the second quarter was 829,000 tons, down 35% from the first quarter and 47% from last year. As Alunorte produces all of Hydro’s own alumina, the nearby Paragominas bauxite and Albras electrolytic aluminum plants are also produced at 50% capacity due to reduced production at the plant. It is still uncertain whether Hydro will be able to resume full production in October. According to the 2017 production, as of now, Hydro’s production reduction has caused at least a reduction in the production of 1.53 million tons of alumina in the international market, even if it is fully restored by the end of October. This will result in a reduction in the actual supply of approximately 550,000 tons. On September 5, Hydro’s Alunorte alumina plant signed two agreements with the Brazilian government, including the Code of Conduct (TAC) and the Social Obligation (TC). Although it is still not confirmed, Hydra regards this. The two articles are important milestones in advancing the negotiations.

Second, the prospect of Alcoa strikes is unclear. On August 8th, Alcoa’s three alumina plants in Western Australia and two bauxite mines went on strike. Alcoa urgently mobilized temporary workers to take over production. Although short-term does not affect the output of alumina and bauxite, but the union Negotiations with Alcoa have not been agreed and are still in the negotiation stage. Alcoa’s Western Australian industry has a strong global position. In 2017, the three alumina plants in the area have a total capacity of 8.98 million tons, accounting for 54% of Alcoa’s alumina production capacity; two bauxite productions of 33.20 million tons, accounting for 74%. % bauxite production capacity. Shipments that have been shipped out of Australia have been affected, making the supply in overseas markets even worse. On September 7, Alcoa’s alumina plant in Western Australia and local unions voted on the new employment agreement. The vote did not reach a consensus. Local unions said workers would continue the strike since August 8.

Third, the Russian aluminum sanctions are pending. Since the U.S. Treasury Department announced sanctions against RUSAL on April 6, it has not yet been fully resolved. In October, the U.S. will make a final ruling. In terms of 2017 production, Rusal has contributed more than 6% of alumina to the global market, and more than 70% of its production capacity is outside Russia. If the sanctions cannot be resolved, the trade of overseas alumina is bound to be affected. Aluminum has a difficult road to sales, resulting in a shortage of overseas markets. On the evening of September 12, the market suddenly reported that Rusal was sanctioned or dismissed by the United States, and the price of Lun aluminum quickly retraced, but the Russian aluminum official did not comment on this.

From the latest developments of Rusal, Hydro and Alcoa, Hydro and RUSAL have released positive signals to resume normal operations, while Alcoa News is relatively negative. Will Alcoa’s strike continue for a long time, thus affecting the supply of overseas alumina in the medium and long term? We analyze in detail the production profit and capacity operation of overseas manufacturers.

2. The profit margin of overseas alumina production is considerable

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Although Alcoa’s strike is continuing, we believe that in the context of the current high-yield production of overseas alumina, Alcoa has a positive attitude toward strikes, or made large concessions, and the possibility of a long-term strike is small.

Different from the tight supply of bauxite caused by domestic environmental protection policies, the supply of overseas bauxite is very sufficient, and mature manufacturers have a complete industrial chain from bauxite to electrolytic aluminum, ensuring that alumina can be stably and stably sold at a low price for a long time. Production of electrolytic aluminum. From the cost observations announced by the overseas first-tier alumina producers, South 32 has the lowest production cost. The average production cost in 2017 is about US$200/ton, and the average annual cost of Rusal in 2017 is about US$270. After 2018, the cost will be The innovation is low, and it has fallen to around $230 in the first half of the year. Alcoa and Hydro also announced the cost and price. In the first half of the year, as the alumina price went up, Alcoa alumina’s profit margin has approached 40%. After Hydro’s production cuts, the production cost has risen rapidly, resulting in a lower profit margin. The half-year profit margin remained at around 15%. Other big manufacturers have not clearly stated the cost of alumina production, but Rio Tinto and Vedanta have repeatedly mentioned that they have low cost advantages, and production costs are distributed among the top quartiles of world manufacturers.

Can the strike or shutdown be maintained for a long time under the high profit of alumina? Starting from the maximization of the interests of the manufacturers themselves, it is a reasonable choice for a “rational person” to take measures to resume normal operations as soon as possible. In fact, from the two contracts signed between Hydro and the Brazilian government, we can glimpse the company’s eager hope for a return to production. From the two agreements between Hydro and the Brazilian government, all investment, cost and fines in the TAC are estimated to be 160 million Yarel ($38.43 million), in addition to 250 million Yarel (600,500). The financial reserve for the US dollar; in the Social Obligations (TC), Hydro has committed to invest 150 million Yarel ($36.03 million) for urban infrastructure projects. In both agreements, Hydro has decided to pay at least $130 million. Come to work for the resumption of production.

Hydro is willing to pay a huge sum of money to resume production, naturally because the resumption of production can bring higher returns. Compared with Hydro, Alcoa’s alumina profit is even more impressive. In the second quarter of 2018, alumina sales profit has approached 40%. In terms of volume, Alcoa is the largest alumina producer in the world. In 2017, the annual output of alumina is 13.7 million tons. The ratio of alumina to electrolytic aluminum is as high as 4:1, which means that in addition to its own use, Alcoa annually There are still nearly 7 million tons of alumina exported. Australia’s three alumina plants account for 54% of Alcoa’s total alumina production capacity and are prominent in Alcoa’s aluminum industry chain. Under the double pressure of high profits and high output, we believe that even if the results of the first trade union negotiations are not satisfactory, Alcoa still has the motive to make greater concessions, and the strike in Western Australia may not be long-term.

3. Long-term supply pressure still exists

Under the stimulation of high profits, does the manufacturer have the possibility of expanding production? We reviewed the latest annual or quarterly reports of major international manufacturers, and sorted out the projects with clear new capacity in the aluminum industry chain. We found that although there is no need to worry too much during the year, supply pressure still exists in the long run.

In 2013, aluminum prices continued to slump for two years, and some international manufacturers have stopped production or sold assets in order to cope with losses. Beginning in 2015, with the start of China’s supply-side reforms, aluminum prices began to rise, and manufacturers began to resume production and construction of different sizes. From the published report, the world’s nine major manufacturers disclosed a total of 10.85 million tons of new alumina production and production capacity, and electrolytic aluminum production capacity of 3.85 million tons. From the construction cycle and production time, most of the new production capacity exists in the long-term cycle, and the absolute increment is small during the year. However, compared with the policy environment at home and abroad, the growth of long-term overseas production is not expected to be underestimated.

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The world’s bauxite reserves are abundant, and overseas manufacturers do not have the trouble of environmental protection and rectification. From the perspective of the entire electrolytic aluminum industry chain, there is no shortage of raw materials. In addition, the supply-side reform only determines the ceiling of China’s electrolytic aluminum production capacity. The increase in production by overseas manufacturers is not limited, so there is no upper limit for electrolytic aluminum production capacity. More importantly, with the reduction of China’s supply, global aluminum prices have been raised, and the overseas aluminum producers’ industrial chain profit margins are generally higher, and manufacturers have sufficient incentives to expand production to obtain higher returns. With power and unlimited, the supply of long-term overseas alumina and electrolytic aluminum can not be underestimated. Compared with overseas giants, domestic manufacturers have many disadvantages such as cost and policy. China does not have the necessary conditions to become a long-term net exporter of alumina.

4. Domestic alumina prices have a risk of falling back

The domestic alumina price is mainly due to the mine rectification and environmental supervision in Shanxi. The supply of bauxite in the northern region is tight. In line with the negative news of the overseas giants, internal and external linkages began. At the end of June, domestic alumina prices went out of two. Round up. Since September, the tension in the northern ore has eased slightly, the price of bauxite has remained high, and domestic companies have increased their overseas ore procurement. In addition, the expectation that Hydro and RUSAL will resume normal operations will cause overseas alumina prices to start to fall, and the internal and external price gaps will shrink. The internal and external factors of the price of Lido alumina in the previous period have been weakened to varying degrees. The domestic alumina price is no longer rising, and the alumina price has a risk of falling back considering the speculation part driven by the external price difference in the previous period.

Looking at the price of electrolytic aluminum, the heat of the cost of alumina in August has faded. After entering September, the drag on consumption has become more apparent, and Shanghai Aluminum has entered the downward channel. In the short term, it is difficult for alumina to bring upward momentum to Shanghai Aluminum, and as prices fall, it may increase the downward trend of the disk. However, as the first major cost item of electrolytic aluminum, the absolute price of alumina is still at a high level in the year. The absolute cost of electrolytic aluminum is still high. There is a large loss in the industry, and the cost still has a bottom support for the price. In the short-term, after the cost returns to the bottom support, we believe that the space under Shanghai Aluminum 14500 is small, there is stocking in the downstream before the festival, the inventory of aluminum ingots is faster, and the macro level is good news, Shanghai aluminum may rebound.

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