Supply and demand imbalance caused electrolytic aluminum industry trapped board

[China Aluminum Industry Network] The electrolytic aluminum industry has continued to slump, and the reason must be traced back to 2008. In western China, including Xinjiang, Ningxia, Gansu, and Qinghai, the cost of coal and electricity is relatively low, which is beneficial to the development of large-capacity electrolytic aluminum. In 2008, due to factors such as industrial layout and political stability, the national policy encouraged capital to enter the western region to invest in the construction of the electrolytic aluminum industry. The original electrolytic aluminum enterprises maintained the status of the industry, some of the power companies were industrial extensions, and private capital seized policy dividends. A large number of electrolytic aluminum production capacity have been newly built in Xinjiang, Ningxia and other regions, laying a foundation for future industry supply and demand contradictions. Taking Xinjiang as an example, by the end of 2013, the planned electrolytic aluminum production capacity will reach 20 million tons, of which the approved production capacity will reach 9 million tons. In 2010, the total electrolytic aluminum production capacity in China was only 23 million tons.

In 2011-2014, China's electrolytic aluminum industry finally ushered in a concentrated "harvest" period. Businesses in the western region have benefited from cost advantages and have risen to the fore. Take Ningxia, Qinghai, Shaanxi, and Xinjiang provinces as an example, in the first half of 2014, the company produced a total of 4.14 million tons of electrolytic aluminum, which was 4.32 times that of the same period in 2008. Xinjiang produced 1.906 million tons of electrolytic aluminum, surpassing Henan and becoming a new industry. Big Brother. However, for the large electrolytic aluminum provinces in Henan Province, Shanxi, Shandong and other places, taking into account the huge cost of suspension and production, raising the difficulty of financing after the suspension of production, there is no willingness to reduce production; at the same time, as a large employment and economy, local governments also ride hard, through For enterprises to fight for direct purchase of electricity and other means to give preferential or subsidies, barely maintain its operations. Under this background, the electrolytic aluminum enterprises in the eastern and central regions are still struggling to support the output and the output has not been reduced. From January to June 2014, total output of electrolytic aluminum in Henan, Shandong, and Shanxi was 3.1931 million tons, an increase of 5.38% over the same period of 2013. The industry as a whole shows a state of "retreating from the west to the east".

Under the influence of a large number of newly-built electrolytic aluminum projects in the northwestern region, China’s electrolytic aluminum production capacity and output have increased significantly. By the end of 2010, China’s electrolytic aluminum production capacity was 23 million tons; however, by June 2014, China’s electrolytic aluminum production capacity has reached 33.2 million tons,1 -In June, 11.5 million tons of electrolytic aluminum was produced, which was 1.75 times the same period in 2010. In the second half of 2014, approximately 900,000 tons of electrolytic aluminum production capacity including Gansu Dongxing Aluminum and Shanxi Zhaofeng Aluminum will be remanufactured, while 2.2 million tons of new production capacity in Xinjiang, Gansu, Inner Mongolia and Liaoning will be ready for launch. The idle and new capacity will continue to increase supply pressure.

Faced with the rapid growth of primary aluminum production capacity, domestic demand is relatively insufficient, and the industry's supply and demand are imbalanced, and electrolytic aluminum prices have been falling steadily. In the western region, relying on the advantages of electricity and coal prices, the industry’s production costs have been continuously lowered, and the industry has been caught in price competition. As a result, the price of electrolytic aluminum has been declining and the industry has fallen into deep losses. In early 2010, the aluminum price was 17,310 yuan/ton, but by the end of June 2014, the price had dropped to 13,496 yuan/ton, the price had dropped by 3,800 yuan/ton, a decrease of 22%; The deepening of electrolytic aluminum industry in 2013 was a loss of 2.314 billion yuan. In the first six months of 2014, the loss was 14.806 billion yuan.

In view of the rapidly growing smelting capacity of the electrolytic aluminum industry, it is expected that the supply pressure in the electrolytic aluminum industry will remain prominent in the short term. On the demand side, in the first half of 2014, the major downstream demand in the aluminum industry fell across the board, with the real estate industry adjusting and the industry’s investment enthusiasm decreasing. From January to June, the real estate industry’s accumulated investment was 4.20 trillion yuan, a year-on-year increase of 14.10%, and the growth rate dropped by 6 Percentage points; total output of refrigerators, air conditioners, and washing machines was 172 million units, an increase of 5.74% year-on-year, a deceleration of 1 percentage point; and auto production was 12.67 million units, a year-on-year increase of 10.90%, and the growth rate dropped by 4 percentage points. In the short term, under the trend of adjusting macroeconomic structure and controlling production capacity, it is difficult to see large-scale stimulus policies or large-scale investment plans, and the aluminum industry's demand will continue to grow at a low and medium rate.
Taken together, overcapacity of electrolytic aluminum has become a decisive factor in breaking the industry's supply-demand balance. The shift of industrial output from high-cost areas to low-cost areas will be the main theme in the future. Under the background of the economic and downstream industry slowing down, the demand for electrolytic aluminum products will also weaken, electrolytic aluminum prices will continue to be under pressure, and industry adjustment will bring about a long-term bear market for the electrolytic aluminum industry.
Under the background of the downturn in the industry, the credit risk of some domestic electrolytic aluminum companies has surged. Based on the above analysis, the industry risks have further deepened. Through sorting out the existing large-scale electrolytic aluminum enterprises, some electrolytic aluminum companies with higher financial risks are screened out, and their risk points are briefly analyzed. From the perspective of corporate commonalities, the electrolytic aluminum companies involved in the production and operation are mostly characterized by low proportion of self-provided electricity and high production costs. As a result, they have shown continuous losses and high debt ratio in terms of financial performance. This is in contrast with the overall performance of the industry. Consistent. From the perspective of individual enterprises, Chinalco, China Power Investment Ningxia Qingtongxia Aluminum, Yunnan Metallurgy, and Yunalu Aluminum, despite their poor financial performance, still receive support from shareholders or the government, and the financing and credit support are still relatively good. Still controllable. However, for Henan Wanji and Zhongfu Industry, their shareholder strength is relatively weak, and the external letter-creating function is relatively weak. The risk of the company is relatively large.

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