Supply-side pressure still exists Shanghai aluminum fundamentals are still weak

The new round of high-level Sino-US economic and trade consultations was successfully concluded
in Washington.
China and the United States have made substantial progress
in agriculture, intellectual property, exchange rates, financial services, trade cooperation, technology transfer, and dispute settlement.
In the United States, downward pressure on inflation remains, employment data unexpectedly weakened, economic data were less than expected, and the market expected the Fed's monetary policy path to turn further dovish
in October.
The UK's compromise on the Irish border safeguard arrangement reduces the risk of a no-deal Brexit
.
The ECB minutes show that a majority of members support the resumption of QE
.
Overall, Sino-US trade frictions have eased, the probability of the Fed's interest rate cut in October has increased, the risk of a no-deal Brexit has decreased, and macro risks have improved
.

From the cost side, the news of Indonesia's mine ban has not had much impact
on domestic bauxite prices.
From January to August 2019, China's bauxite imports were 71.
3857 million tons, of which 9.
0817 million tons were imported from Indonesia, accounting for only 12.
7%.

At present, the proportion of bauxite in Indonesia is not high, and China's bauxite importers have more choices, such as: Guinea has abundant domestic resource reserves and relatively stable resource policies, which can fully meet the import gap
.
Therefore, regardless of whether Indonesia has banned mining or not, the impact on aluminum prices will be limited
.
Recently, alumina prices have remained strong, on the one hand, due to the impact of the pre-holiday environmental protection production restriction policy, on the other hand, the resumption of some alumina production capacity is less than expected, and the willingness of cargo holders to raise prices is strong
.
However, because the production speed of electrolytic aluminum has not been significantly improved, the demand for alumina is not strong, and the price trend of overseas alumina is weak, which suppresses
the domestic alumina price.
In the short term, the rebound trend of alumina will slow down, and the medium and long-term will continue to be bullish, and the cost support of electrolytic aluminum still exists
.

From the supply side, about 50,000 tons of hydropower capacity in western Qinghai has recently begun to resume production; Xinjiang Xinfa in the early stage of the affected 500,000 tons of production capacity began to resume production one after another; Shandong Weiqiao has resumed production of about 450,000 tons, and the remaining capacity is still planned to recover; The second phase of Baotou Xinhengfeng has a production capacity of 250,000 tons, which is expected to start power and put into operation
on October 15.
After October, it is planned to resume production of Chuangyuan Metal 200,000 tons, Yunnan Shenhuo Phase I 100,000 tons, Yunnan Qiya 150,000 tons, Bai Mine 150,000 tons, Guangyuan Linfeng 250,000 tons, a total of about
850,000 tons.
On the whole, there is a lot of production capacity in the fourth quarter, and it takes a certain period from the resumption of production to the realization of production, so the pressure on the supply side will be concentrated in November and December
.

From the perspective of consumption, from January to August, the housing construction area of real estate development enterprises was 813156 million square meters, an increase of 8.
8% year-on-year, and the growth rate was 0.
2 percentage points
lower than that from January to July.
The newly started area of housing was 145133 0,000 square meters, an increase of 8.
9%, and the growth rate fell by 0.
6 percentage points
.
The completed area of housing was 416.
1 million square meters, down 10.
0%, a decrease of 1.
3 percentage points
.
According to the latest data from the Passenger Vehicle Association, the wholesale sales volume of the national passenger car market in August was 1.
621 million units, down 7.
9% year-on-year, and the wholesale sales from January to August were 13.
0981 million units, down 12.
0%
year-on-year.
As the two largest areas of aluminum consumption, the performance of real estate and automobiles is not optimistic
.
In terms of inventory, the total inventory of aluminum ingots in the consumption area on Monday totaled 945,000 tons, down 32,000 tons
from last Thursday.
During the National Day period, the reserve stock was basically digested, and the inventory returned to the stock state, and it is expected that the social inventory may drop to 700,000 tons
by the end of 2019.

Overall, on the one hand, macro risks have improved, and the cost side has brought support; However, on the other hand, in the case of less than expected consumption improvement, the rise in alumina prices is difficult to transmit to the aluminum ingot end, and the fundamentals are still weak
overall.
It is expected that in the short term, electrolytic aluminum will consolidate at a low level in the range of 13600-13900 yuan / ton, and the space below is also limited
.
In operation, it is not advisable to chase the short
too much.