On August 17, Meng Wei, spokesperson of the National Development and Reform Commission, introduced the energy consumption intensity in the first half of this year: Qinghai, Ningxia, Guangxi, Guangdong, Fujian, Xinjiang, Yunnan, Shaanxi, and Jiangsu were 9 provinces (regions) in the first half of this year. Energy consumption intensity did not decrease year-on-year but increased. The reduction rate of energy consumption intensity in 10 provinces did not meet the progress requirements, and the national energy conservation situation is very severe. The document requires that the 9 provinces (regions) whose energy intensity does not decrease but increase, and the cities and prefectures whose energy intensity does not decrease but increase, this year suspend the energy-saving review of the “two highs” projects other than the major projects planned by the state. And urge all localities to take effective measures to ensure the completion of the annual energy consumption dual control target, especially the target task of reducing energy consumption intensity.
Judging from the 9 provinces (Qinghai, Ningxia, Guangxi, Guangdong, Fujian, Xinjiang, Yunnan, Shaanxi, and Jiangsu) where energy intensity did not drop but rose in the first half of the year, many of them were major producers of aluminum, zinc, and tin. District. In 2020, the output of primary aluminum in these 9 provinces will account for 40% of the country, the output of zinc ingot will account for 46.1% of the country, and the output of tin ingot will account for 59% of the country.
In May and July, Yunnan, Guangdong, and Guangxi have carried out two rounds of electricity curtailment and production restrictions, which caused greater disturbance to the output of these three varieties. From the current point of view, the first-level warning areas include Yunnan and Guangxi, where electricity and production have been significantly curtailed at this stage, and cover the key production areas of electrolytic aluminum and refined zinc such as Xinjiang and Shaanxi. Therefore, it is not ruled out that non-ferrous varieties will be further expanded to Xinjiang, Shaanxi, Guangdong and other places. In the future, it is necessary to pay close attention to the policy of curtailment of electricity and production. If energy consumption control is further increased in the future, it may have a further negative impact on the already fragile supply.
In addition, Guangdong and Jiangsu are both important consumption regions. Therefore, if power and production are restricted in these two regions in the later period, consumption in the non-ferrous sector will also be restricted.
In general, under the control of energy consumption, the supply-side constraints on non-ferrous products (aluminum, zinc, tin) will most likely be greater than the impact on consumption. At the same time, there is a high probability that interference on the supply side of the non-ferrous sector will continue to run through for a long time in the future.
Aluminum market supply and demand outlook
On May 11, Yunnan implemented a staggered production of electrolytic aluminum in the province, requiring a 10% reduction in load; on May 18, an increase in power cuts required a 40% reduction in load. As of May 31, according to the tracking situation, the actual scale of production reduction was more than 20%, which means that the scale of production reduction in this area is about 880,000 tons.
Since mid-July, Yunnan has once again restricted electricity and production. Among them, aluminum companies demanded 25% cuts. In the second week of August, aluminum companies began to implement a 30% reduction in production. In the first week of August, Guangxi joined the power curtailment, with aluminum companies cutting power by 10%; and requiring aluminum companies to implement a 30% production limit before August 15. The impact of aluminum this time is estimated at the level of 400,000 to 500,000 tons. At the same time, the 880,000 tons previously shut down in Yunnan are basically hopeless to resume production in August.
Therefore, the domestic aluminum output has continued to decline throughout the year. According to the most optimistic production scheduling assumption, China’s primary aluminum output in 2021 is expected to be 39.1 million tons, which is higher than the forecast at the beginning of the year. Output fell by 900,000 tons. On August 17, after the announcement of the completion of the dual control of energy consumption in the first half of the year, the pressure on production restrictions in Xinjiang has significantly increased, and it is expected that the subsequent annual aluminum output will be further reduced.
At the same time, domestic consumption bottomed out in August and began to gradually transition to the traditional peak season. The traditional peak season from September to November will drive consumption better month-on-month.
The author predicts that even with dumping of reserves and import supplements, the balance sheet of aluminum supply and demand will remain in good condition later this year, and the carry-over inventory at the end of the year may be flat at the level of 600,000-650,000 tons last year.
Overall, the price of 20,000 yuan/ton has not yet fully reflected the future aluminum supply and demand pattern. The contraction of the supply side, the adjustment of the consumer sector and the existence of overseas replenishment demand, especially the interference of the supply side, optimize the supply and demand balance sheet, in the medium term, the space for aluminum prices to rise is expected to be further opened.
Zinc market supply and demand outlook
Starting in mid-May, Yunnan began to implement the power load shifting policy, and most local zinc smelting enterprises reduced the power load. It can be roughly divided into several stages: Phase 1: May 10 and May 17 for two weeks The electricity load dropped by 10%; the second stage: the two weeks of May 24th and June 1st, the reduction of electricity load rapidly expanded to 30%-50%, and even some enterprises stopped production; the third stage: June 7th Zhou Yunnan smelter’s production limit began to loosen marginally, and production gradually resumed in mid-to-late June. The output of Yunnan’s zinc smelting from May to June is estimated to be about 30,000 tons.
Starting from July 14th, Yunnan has once again restricted electricity and production, requiring zinc smelting companies to reduce their load by 5%-40% during peak electricity consumption; the load reduction in August was once expanded to 5%-50%, and the dynamics began in the second half of August. Minor adjustments. At the same time, the Guangxi region also joined the power rationing in August, and the local zinc smelting enterprises reduced the load by about 50%. Individual companies in Inner Mongolia also implemented a power limit of less than 10% in August. The impact of electricity curtailment on zinc smelting output in July is estimated to be about 10,000 tons, and it may exceed 20,000 tons in August.
In addition, on August 16, a major safety accident occurred in a lead-zinc smelting enterprise in Inner Mongolia. Its lead smelting production has been suspended, and its zinc smelting production is also facing obvious uncertainty in the mid-term.
Therefore, the increase in domestic zinc smelting output in July was far less than expected, and the month-on-month output in August will fall again. Later this year, the rate of increase in domestic zinc smelting output will also be lowered.
At this stage, the domestic zinc ingot inventory is basically fluctuating at a low level of 110,000-120,000 tons, and the domestic spot is showing a premium, especially in Guangdong. The premium is more obvious; it is expected that the domestic zinc ingot inventory will continue at 100,000 later this year- The level of 150,000 tons.
With the main supplement of dumping reserves, domestic zinc ingot supply and demand may shift from a tight balance to a slight surplus later this year, but the magnitude of the surplus is relatively small.
In summary, the production limit of zinc smelting in the southwest region is maintained, and the smelting supply side will be disrupted or normalized later this year. At the same time, overseas consumption continued to improve, and the country began to slowly transition to the peak consumption season. The dumping of reserves may raise zinc inventory levels in stages, but the rate of increase may be limited. In the short term, zinc prices are expected to rise to 23,000 -23.2 million yuan/ton. In the medium term, it may be difficult for zinc prices to break out of a clear trending market.
Tin market supply and demand outlook
The distribution of tin production is relatively concentrated, and the supply of main producing countries is constantly disturbed
The distribution of refined tin production in the world is very concentrated. In 2020, China, Indonesia and Malaysia will account for 75.2% of the global output in Asia. The distribution of refined tin production in China is also very concentrated. The production of refined tin in Guangxi and Yunnan together accounts for 59% of the country.
Since the beginning of this year, the epidemic situation in Indonesia, Malaysia, and Myanmar has continued to worsen, which has slowed the recovery of the output of major tin producing countries in Southeast Asia. The output of the Malaysian Smelting Group and Tianma Company even dropped significantly. In the first quarter, the refined tin output of Tianma Company dropped by nearly 10,000 tons year-on-year. , Roskill, an executive of the Malaysian Smelting Group, expects to reduce production by 50-10,000 tons this year.
Since the beginning of this year, the outbreak in Myanmar has not only affected its own production, but also affected the customs clearance of Chinese ports. Due to the outbreak in Myanmar, the Ruili port of Yunnan has undergone multiple nucleic acid tests and customs closures for all employees, which has affected domestic tin ore imports to a certain extent. At the same time, environmental inspections in April, power cuts in Yunnan since mid-May and Guangxi power cuts in August have all negatively interfered with refined tin production.
Electricity curtailment caused unexpected contraction of domestic supply
In May, due to power shortages in Yunnan, all tin smelters except Yunxi were shut down. In that month, domestic tin ingot production was nearly 2,000 tons lower than expected at the beginning of the month. On June 28, Yunxi underwent maintenance for no more than 45 days. China’s tin ingot production continued to be significantly disrupted. In July, the output of tin ingot fell by 2,800 tons from the previous month. In mid-to-early August, Yunxi gradually recovered, but Guangxi was disturbed by the power cut, which is estimated to affect the production of about 1,000 tons, which will affect the progress of the recovery of refined tin production.
Since May, benefiting from the strong growth of overseas tin consumption, the tin export window has continued to open, and China’s tin ingot exports have increased sharply, and China’s tin smelting has been affected by power rationing in Yunnan and Guangxi. Tin stocks remained at record lows, and both Shanghai and London tin stocks showed a very tight situation.
The apparent tin inventory continues to decline
As of August 13, the total LME+SHFE tin inventory was 3,57 tons, a decrease of 3,708 tons from the end of last year and a decrease of 5,236 tons from the same period last year. In the same period, Shanghai tin stocks fell to about 1,500 tons, which was an extremely low level since listing, while Lunxi remained at a low level of about 2,000 tons. On the whole, the dominant tin inventory has shown a continued downward trend.
Lun tin spot and Shanghai tin spot premiums remain high
Due to low tin inventories in Shanghai and London, Lunxi Cash-3M has maintained a record high since February, while the Shanghai tin spot premiums and discounts have risen significantly since June. The current Shanghai tin spot premiums are 5,000 yuan/ton. It is also at a very high level in history. This shows that under the background of absolute low inventories, both Shanghai and London tin spot are in a very tight state.
On the whole, the tin supply side continues to be disturbed, and consumption has benefited from the continued high boom in semiconductors. LME+SHFE tin stocks have fallen to record lows, and tin ingots continue to show a very tight situation. Due to the impact of the epidemic, the main tin producing countries in Southeast Asia have slowed production recovery, and the country has continued to be disturbed by power and other problems, especially in Yunnan and Guangxi, the main producing areas of domestic tin ingots. In this context, Shanghai Tin is expected to hit 250,000 yuan/ton in the next three months.
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Post time: Aug-23-2021