Aluminum Market Insights – China Update

The aluminum industry in China is expected to see sustained growth in 2021 and beyond. Below we discuss macroeconomics, industry information, corporate news, and logistics that are likely to support the growth in aluminum supply and demand.

 

Macro Economy

1. China’s Economy

According to the report released on the 5th by the Guanghua School of Management of Peking University, the year-on-year growth rate of GDP in the fourth quarter of 2020 is expected to reach about 6%, and the growth rate of GDP in 2021 is expected to be close to 9%.

2. PMI

In December 2020, China’s economy recovered to a good momentum and continued to consolidate. China’s Manufacturing Purchasing Manager index, non-manufacturing business activity index, and comprehensive PMI output index were 51.9%, 55.7%, and 55.1% respectively. Although they were slightly lower than those in November, they continued to operate at a high level in 2020 and remained above the boom and bust line for 10 consecutive months.

Industry information

1. Industry Event

Driven by energy-saving and emission reduction policies and the acceleration of electrification, automobile lightweight is accelerating. The penetration rate of aluminum battery box, subframe, control arm, and steering knuckle is increasing. At the same time, hot-formed body parts are also applied on a large scale. At present, the mainstream lightweight materials are high-strength steel and aluminum alloy. In 2020, high-strength steel and aluminum alloy will occupy more than 85% of the automotive lightweight market, of which aluminum alloy accounts for nearly 65%.Price

2. Trend of Ingot

The high production profit of aluminum enterprises will stimulate electrolytic aluminum production capacity to speed up investment, which will exert long-term pressure on aluminum price. Recently, the aluminum price fell to a low level, the market procurement picked up, and the inventory of Shanghai aluminum decreased slightly. At present, the domestic electrolytic aluminum production capacity is slow, making the inventory still at a low level, supporting the aluminum price to stabilize. Electrolytic aluminum: in 2020, China’s output will be 37.25 million tons, a year-on-year increase of 4.25%, consumption will be 37.167 million tons, a year-on-year increase of 0.99%, and the built capacity will be 42.561 million tons, a year-on-year increase of 3.79%.

News of Corporates

On December 20, the Baowu aluminum phase I project was put into operation, with a total investment of nearly 7 billion RMB, covering an area of 790 mu. The design capacity is 80000 tons/year for aluminum alloy automobile plate, 50000 tons/year for aluminum alloy medium and heavy plate, and 170000 tons/year for aluminum alloy plate and strip. On the first day of 2021, Tesla dropped a new year’s “bomb”: it announced the official launch of domestic model Y, with the highest price falling by 165100 RMB.

Logistics

During the New Year’s Day period, China’s export container freight rate index rose by 5% over the previous period, mainly because this index is rising almost every week. In May 2020, the average value was 837 points, while the current value was 1658 points, almost doubling.