Analysis on the investment prospect of China's ele

2022-08-21
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Analysis of investment prospects of China's electrolytic aluminum industry in 2017

as of the end of 2016, China's total electrolytic aluminum production capacity was 42.44 million tons, while compared with the output of 32.38 million tons in 2016, the capacity utilization rate was only 76%, which is still an industry with serious overcapacity

according to the "2017 coal reduction substitution action plan of Shandong Province" issued by Shandong development and Reform Commission, there are 3.21 million tons of illegal electrolytic aluminum production capacity in Shandong Province that need to be shut down. According to Aladdin's statistical data, the illegal production capacity in Inner Mongolia is 400000 tons, and that in Xinjiang is 950000 tons, with a total illegal electrolytic aluminum production capacity of 4.56 million tons. At the same time, according to the statistical data, in the first half of 2017, due to compliance problems, the production capacity was reduced by 250000 tons, including 180000 tons of Weiqiao group and 70000 tons of Xinjiang Jiarun. Therefore, as of the first half of 2017, there were still 4.31 million tons of illegal production capacity to be shut down, and the electrolytic aluminum industry will enter the period of substantial capacity removal in the next stage

the 2017 work plan for the prevention and control of air pollution in Beijing, Tianjin, Hebei and surrounding areas issued in February 2017 clearly points out that for "2+26" cities, the production of electrolytic aluminum plants is limited to more than 30% in the heating season, based on the number of electrolytic cells that have stopped production; Alumina enterprises are limited to about 30% of production, calculated by production line; All carbon enterprises that fail to meet the special emission limit will be shut down. If they reach the special emission limit, the production will be limited by more than 50%, calculated by the production line

in order to further improve the national pollutant emission standard, the Ministry of environmental protection decided to revise the emission standard of pollutants for aluminum industry (GB) and the emission standard of pollutants for recycled copper, aluminum, lead and zinc industry (GB), which will add "unorganized emission control measures". The new emission standards have been implemented in advance by aluminum mines, alumina plants, electrolytic aluminum plants, recycled aluminum plants and other enterprises in the "2+26" urban area of Beijing, Tianjin and Hebei since October 1, 2017

"2+26" cities include Beijing, Tianjin, Shijiazhuang, Tangshan, Langfang, Baoding, Cangzhou, Hengshui, Xingtai and Handan in Hebei Province, Taiyuan, Yangquan, Changzhi and Jincheng in Shanxi Province, Jinan, Zibo, Jining, Dezhou, Liaocheng, Binzhou and Heze in Shandong Province, Zhengzhou, Kaifeng, Anyang, Hebi, Xinxiang, Jiaozuo and Puyang in Henan Province

"2+26" urban areas (assuming that the green environmental protection of the express industry in the province also needs to establish a set of systems and standards, and the production capacity involved is within the scope of environmental protection and production restriction) involve 17.48 million tons of electrolytic aluminum production capacity, accounting for 40.35% of the total national production capacity; The production capacity in progress is 15.365 million tons, accounting for 40.24% of the total production capacity in China; The monthly output is 1293800 tons, accounting for 40.69% of the total monthly output of the country. According to the calculation of four months in the heating season, the affected output is about 5million tons

supply side reform is the strategic policy of the country's long-term development, and the removal of production capacity is only the first step. Subsequently, with the shutdown of illegal production capacity and the implementation of environmental protection and production restriction in the heating season, the electrolytic aluminum industry has realized the clearing of production capacity, the decline of production capacity and the return of inventory to a reasonable level. The situation of excess supply in the industry was reversed, and the profits of enterprises continued to improve. Finally, the asset liability ratio of enterprises fell to the normal level, and the industry developed smoothly, healthily and orderly. At present, the asset liability ratio of major electrolytic aluminum enterprises is still high, and the illegal production capacity is gradually shutting down, which still has great room for improvement. During this period, the price of electrolytic aluminum is expected to continue to rise

due to the late urbanization and industrialization process in China, the social ownership of waste aluminum is insufficient. Before 2009, the waste aluminum materials of domestic recycled waste aluminum were mainly imported, accounting for more than half of the global waste aluminum materials, and more than 80 countries or regions have transnational allocation of resources. From 2002 to 2015, China imported 27.654 million tons of waste materials, with an average annual import of 1.975 million tons. Since 2011, China's import of waste aluminum has shown a negative growth, and by 2015, it has decreased for five consecutive years, while the domestic recovery of waste aluminum has increased steadily. According to incomplete statistics, during the "12th Five Year Plan" period, the total amount of domestic waste aluminum recycling was close to 10million tons

the substantial growth of China's aluminum consumption started in 2003, while the average scrap cycle of China's aluminum products is years. According to estimates, the average annual growth rate of China's domestic aluminum scrap production before 2017 was about 10%, and the base was low. After 2017, with the arrival of the scrap peak, the estimated growth rate will reach more than 15%

it should be noted that in 2016, China's annual output of recycled aluminum increased by only 4.07% year-on-year, about 6.4 million tons, while this data showed an average annual growth rate of 8.85% and 8.65% in 2015 and 2014, respectively. China Nonferrous Metals Association predicts that China's recycled aluminum output in the first half of 2017 will be about 3.35 million tons. Assuming annualization, the year-on-year growth rate of China's recycled aluminum in 2017 is only 4.68%

in the past 10 years, China's renewable aluminum output increased from 1.94 million tons to about 6.2 million tons in. During its middle age, the annual year-on-year growth rate of renewable aluminum output remained at about 20% (except in 2008). During the year, the annual year-on-year growth rate of China's renewable aluminum output fell to%

the decline in production capacity growth has a lot to do with the rapid decline in industry profits in previous years. In the downward cycle of aluminum prices in the past few years, the weaknesses of China's recycled aluminum enterprises, such as single product structure, serious product homogenization, low-end cast aluminum alloy, high cost and low technical content, have been amplified, and the industry's profitability is difficult, resulting in the low capacity utilization rate of China's recycled aluminum enterprises. The Nonferrous Metals Association predicts that the capacity utilization rate of China's recycled aluminum in 2016 is only 64%. Strengthen industry access and enhance market concentration. The recycled aluminum industry has been in a small, disordered and scattered state, with many small and medium-sized enterprises, small monomer capacity and low capacity utilization, and most of them are in a disordered production state. For this reason, the state has gradually increased the specification of models below 10kN in the renewable aluminum industry in the "aluminum industry access conditions" issued successively in 2007 and 2013, and made strict requirements on production capacity, technical route, energy consumption, recovery rate and other aspects, further improving the industry concentration

although the national access requirements for recycled aluminum have been raised repeatedly, there are still many small and medium-sized enterprises that fail to meet the standards of production capacity and environmental protection. At present, the national renewable aluminum production capacity is 8.46 million tons, but only 29 enterprises meet the aluminum industry norms, with a total production capacity of 3.625 million tons, accounting for only about 43% of the total renewable aluminum production capacity. About half of the enterprises' production capacity is less than 50000 tons, or even less than 30000 tons

recycled aluminum production enterprises are mainly concentrated in Guangdong, Jiangsu and Zhejiang, Chongqing, Shandong and other places, accounting for more than 59% of the total output of the four places, which are scattered all over the country

from August 7 to August 15, the fourth batch of eight Central environmental protection supervision groups of the state have all realized the presence of inspectors. Among them, Jiangsu, Zhejiang and Shandong provinces have a great impact on the recycled aluminum industry. In addition, a small number of small and medium-sized recycled aluminum enterprises in Sichuan and Qinghai have stopped production for more than one month, but the total amount is relatively small, and the main impact is still in Jiangsu, Zhejiang and Shandong. According to statistics, small and medium-sized recycled aluminum enterprises with a production capacity of less than 2000 tons/month in Jiangsu, Zhejiang and Shandong are basically required to stop production. In addition, the local government requires that the production limit and shutdown time be more advanced. As early as the end of June, some regions in Jiangsu and Zhejiang have already started to limit the production. 6. The tested samples must be placed safely during the test, and they are basically in the shutdown state after August 10, which directly leads to the sharp reduction of the supply section. According to Asia metal statistics, since the end of 2016, affected by environmental protection policies, some recycled aluminum plants have begun to reduce production and stop production. In May alone, 57 recycled aluminum enterprises reduced production. Affected by environmental supervision, the operating rate of recycled aluminum alloy enterprises has fallen below 50%. These production reduction and shutdown capacities are basically not in line with the industry access specifications, and the production capacity is less than 30000 tons. With the continuous promotion of environmental protection supervision, these illegal production capacities are expected to be cleared

it is conservatively estimated that the recovery of new aluminum scrap in China in 2016 is about 560000 tons, after deducting the 170000 tons of reduced imports (bureau of statistics data), it is estimated that 300000 tons of new aluminum scrap will be supplied in 2016. In 2016, China's recycled aluminum output increased by about 280000 tons (based on the association's data of 6.4 million tons, with a year-on-year growth rate of 4.07%). More importantly, we believe that in 2016, the annual recycling volume of domestic waste aluminum has reached a critical point, and the growth rate will reach a higher level. Therefore, without a significant increase in the total output of the downstream recycled aluminum industry, it is expected that the gap between the price of waste aluminum and aluminum ingots will continue to widen

important deduction of industrial trend I! Further, with the gradual deepening of the supply side reform of electrolytic aluminum, the new capacity of electrolytic aluminum is limited, and even the stock reduction stimulates the rise of aluminum prices (aluminum ingots and scrap aluminum will rise at the same time, but aluminum ingots will rise more). The rapid increase in profits brought by the rise in prices will improve the capacity utilization of recycled aluminum, which is expected to increase from the current 64% to about 80% at that time. In this case, the new waste recycling of renewable aluminum companies will stimulate the import of overseas waste aluminum to pick up again (because the supply side reform of electrolytic aluminum will make the price of overseas waste aluminum attractive again)

important deduction of industrial trend II! According to the calculation of the volume evolution of China's imported scrap aluminum in, even if the annual output of recycled aluminum increases by 1.6 million tons in the next year, the overseas scrap aluminum can solve about 1million tons, and the domestic scrap aluminum can solve about 675000 tons according to the annual increase of 4.5 million tons by 15%. In total, it can better solve the increase of scrap aluminum consumption caused by the increase in the utilization rate of recycled aluminum production capacity

therefore, we predict that in the coming years, we will first see a significant improvement in the profits of renewable aluminum companies (both volume and price), and then see the operating rate of renewable aluminum enterprises reach a historical high. After maintaining it for about one year, the leading companies will probably start to expand renewable aluminum production capacity again

enjoy the advantages of overseas low-cost scrap aluminum and domestic high-priced products. On July 17, 2017, China made it clear to the World Trade Organization (WTO) that as an important activity in the process of prohibiting the import of "foreign garbage" environmental protection activities, by the end of 2017, China will ban the import of 24 kinds of solid wastes in four categories, including waste plastics, paper, waste slag, and textiles. According to the notice received by the renewable metals branch of China Nonferrous Metals Industry Association, the import of waste hardware, including waste wires, waste motors and motors, will be prohibited by the end of next year

at present, the seventh category is mainly prohibited from import, and the sixth category of waste aluminum and copper is not within the scope of prohibition. At present, the difference between six categories and seven categories is that the seventh category needs to be disassembled before consumption, while the sixth category can be consumed directly. Scrap aluminum, such as chips, aluminum chips and cans, can be used directly

according to the calculation, the import volume of waste aluminum in 2016 was 1.917 million tons, of which the seventh category accounted for about 40% - 50%, which will affect about 1million tons of waste aluminum. As the world's largest importer of scrap aluminum, once the import of scrap seven is prohibited, the price of overseas scrap seven will fall due to the sharp contraction of demand, and the price difference with domestic scrap aluminum will expand

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