LME Aluminum Price in 2005: The Bear's Chinese Feast
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May 24 11:07:01, 2024
In 2004, the international aluminum market was booming in both production and sales, and the prices in the whole year showed a staggering upward trend. In China, due to the government's macro-control, Shanghai Aluminum prices are contrary to LME aluminum prices most of the time. This article analyzes the global economic situation, the U.S. dollar exchange rate, the supply and demand of the global aluminum market, and technical analysis. Through a comprehensive evaluation, it reveals the overall aluminum price level of LME in 2005, and also analyzes the possible characteristics of aluminum price changes in 2005 in Shanghai. . 2004: Inside and outside the aluminum market, Double Sky, 2004, is the year of the magnificent bull market of LME aluminum market. Due to rapid economic growth in major countries and regions, both aluminum production and sales growth, and output growth is not as good as consumption, so that LME market aluminum prices continue to rise in the bull market in 2003, after the sharp adjustment in the second quarter, regain the upward momentum. The annual trend is upward, but the upward process is more tortuous. Shanghai aluminum prices are determined by the volatility of LME aluminum prices and domestic fundamentals. In 2004, due to the large changes in the domestic fundamentals, Shanghai aluminum prices and LME aluminum prices are quite different. Before mid-April, Shanghai aluminum prices basically changed with the aluminum price rhythm of LME, but after that, it showed a trend of running counter to it. In 2004, Shanghai aluminum prices were determined by LME aluminum price volatility and domestic fundamentals. Therefore, only on the basis of grasping the volatility of LME aluminum prices, it is only possible to clearly understand the changes in the domestic fundamentals before it is possible to have aluminum in Shanghai. Success in investment. In 2005, economic growth was unsustainable and the depreciation of the dollar was in sight. LME aluminum bull market is difficult to find to support 2004 global economic growth hitting a new high in recent years, with an estimated 4%. It will slow down to 3.4% in 2005. The IMF pointed out in the semi-annual global economic outlook that since the negative effects of soaring oil prices have begun to appear, global economic growth has slowed down, and consumer confidence has been generally lacking in major countries. As the overall situation of the global economy has greatly improved, central banks around the world have been able to abandon the stimulus policy of ultra-low interest rates in the next two years and instead gradually increase interest rates. However, the pace of raising interest rates must depend on the progress of the global economy out of the shadow of high oil prices. The IMF predicts that in 2005, the U.S. economic growth rate will slow to 3.5%, which is 0.8% lower than in 2004. After a period of strong recovery, the Japanese economy is still above the potential expansion rate and has growth potential. The euro zone's economic growth is expected to be 2.2%, and almost completely rule out the possibility of raising interest rates; China's economic growth rate will be The 9.0% in 2004 decreased to 7.5%. If the investment drops sharply or oil prices continue to remain high, the economy may have a "hard landing." The effect of world economic development on aluminum prices is mainly reflected in the fact that economic growth can lead to an increase in aluminum demand, thus changing the supply and demand balance in the aluminum market. As the world economy may slow down in 2005, it will be difficult to support LME aluminum prices to maintain the bull market. At the end of 2004, LME aluminum prices maintained an overall upward trend and were directly affected by the US dollar exchange rate. In general, there is a close negative correlation between the exchange rate of metal aluminum and the US dollar in the international market. Historically, large and trendy changes in the exchange rate of the U.S. dollar will cause the reverse movement of metal aluminum prices, but these effects are not. . It is expected that the US dollar will still have room for depreciation in the near future and it will support aluminum prices. However, it is expected that in the first half of 2005, due to the Bush administration’s intention to control the double deficit, the depreciation rate of the US dollar will slow down and even rebound, thus putting pressure on aluminum prices. Looking at supply demand, the main wind production analysis: The world's primary aluminum output increased rapidly In 2004, the world’s primary aluminum production was 29.956 million tons, which was 5.3% higher than in 2003. The only region where production was reduced was North America. On the contrary, China's primary aluminum production has grown at a very high rate. African production has grown faster, but the total amount has been lower. In 2004, China’s aluminum production was estimated at 6.296 million tons, a 14.5% increase from 2003, and led to rapid growth in exports, which has had an important impact on international aluminum prices. However, the Chinese government has been suppressing production through administrative measures. The National Development and Reform Commission of China decided in March 2004 to adopt restrictions on new projects for steel, electrolytic aluminum, and cement to curb investment in overheated industries. It will play a certain role in suppressing the growth of aluminum production capacity, which will help control aluminum production growth and will have a longer-term impact on the aluminum market. However, due to a painful production and production cost reduction issue for production companies, it is expected that in 2005 China's aluminum output will remain at a high level and will decline slightly. The North American supply situation is exactly the opposite of China. Production in 2004 is expected to be 5.138 million tons, which is a 6.8% reduction from 2003. As a result of the impact of higher electricity prices, the partial smelting capacity of metal aluminum in North America was closed. As of August 2004, there were 1.637 million tons of capacity that had been shut down and 127,000 tons of resumption. In addition, because mineral resources are non-renewable resources, taking into account the issue of protective development of resources, countries such as the United States use foreign resources as much as possible and develop as little as possible of their own mineral resources. This is one of the reasons why North America's capacity to shut down has not been reopened in large areas. According to predictions from the Standard Bank, Goldmansachs, and the United Kingdom Commodity Research Institute (CRU), the global aluminum production level in 2005 will be 3.111 million tons, an increase of 5.4% from 2004, slightly higher than the 5.3% growth rate in 2004. Consumption analysis: Consumption growth rate is much higher than the growth rate of production. China's factors have attracted much attention. In 2004, the world’s primary aluminum consumption was 29.8 million tons, an increase of 8.4% over 2003. Among them, the consumption in the United States, China, and Eastern Europe grew faster. Over the past few years, the growth in demand for aluminum in China has been an important factor in the consumption of primary aluminum in the world. In 2002, China's consumption of primary aluminum expanded 19.9%, compared with 22% in 2003. In 2004, China's metal aluminum consumption is expected to be 5.872 million tons, an increase of 13.6%. In the 1990s, China’s aluminum consumption was less than 5% of the global total, but as aluminum usage grew exponentially, this proportion reached nearly 20% in 2003. The growth of aluminum consumption in China has been supported by infrastructure, urbanization, and the emerging middle class's consumption of aluminum products and the integration of manufacturing sectors. It is expected that the growth rate of China's aluminum consumption may slow down in 2005, but it will maintain rapid growth. In 2004, aluminum consumption in the United States is estimated at 6.233 million tons, an increase of 10.2% over 2003. Mainly reflected in strong demand from the housing and construction sectors and the automotive industry. It is expected that aluminum consumption in the United States will continue to grow in 2005, but the growth rate will decline as the economy slows down. According to predictions from the Standard Bank, Goldmansachs, and the United Kingdom Commodity Research Institute (CRU), the global level of aluminum consumption in 2005 will be 35.102 million tons, an increase of 5.7% from 2004, which is much lower than the growth rate in 2004. Supply and demand balance analysis: slowdown in demand growth, price weakening In 2003 and 2004, LME aluminum prices rose for two consecutive years, but only in 2004 there was a shortage of primary aluminum. In 2003, the world's primary aluminum consumption was 27.482 million tons, and the output was greater than the consumption of 517,000 tons. In 2004, the world's primary aluminum consumption was 29.8 million tons, and consumption was greater than 294,000 tons. In 2005, the consumption of primary aluminum was 31.502 million tons, and the consumption was greater than the 392,000 tons produced. The original aluminum will still show a gap. This gap is larger than in 2004, but it must be realized that the supply and demand balance of primary aluminum is only a component of the balance of supply and demand of aluminum in the world, rather than a full reflection of the supply and demand situation. If we take into account the supply and demand balance of recycled aluminum, this gap will be greatly reduced. In 2005, the growth rate of primary aluminum demand was 5.7%, which was much lower than the rate of 8.4% in 2004. It is expected that the growth rate of 5.4% of primary aluminum production in 2005 will be basically the same as the 5.3% growth rate in 2004. In other words, compared with 2004, the growth rate of world primary aluminum demand in 2005 was greatly slowed down, while the growth rate of primary aluminum production did not change much. Therefore, from the perspective of the growth rate of supply and demand for primary aluminum in 2005, it can be inferred that in 2005, the supply and demand situation of aluminum in the world was not as good as in 2004, and the price of aluminum will be subject to significant downward pressure. On the other hand, because of the expected characteristics of futures prices, there has been a certain bubble in aluminum prices during the past two years of rising prices, and this part of the bubble may be destroyed in 2005. Therefore, the existence of a supply gap in the aluminum market in 2005 does not mean that LME aluminum prices in 2005 will continue to show an upward trend throughout the year as it did in 2004. Technical Analysis The basic characteristics of LME aluminum price movements are constant fluctuations, and the variation is often quite large. The LME aluminum price movement is actually a concrete manifestation of the world economy. Studying the relationship between the world economic cycle and LME aluminum prices will help us to grasp the LME aluminum price movement. Economic cycle and aluminum prices The economic activities of human society are characterized by continuous cycles of peaks, valleys and peaks. After a landing-depression-recovery-rise, it constitutes a complete economic cycle. The existence of a cyclical pattern of world economic development is not based on human will. In the period of high economic cycle, LME aluminum prices will generally skyrocket. There are two kinds of soaring patterns: one is that the main boom period is only one year, and the main soaring time is in the second quarter and the fourth quarter, so that the top two years appear. When new highs are not reached, or when new highs are reached, the new highs appear to be relatively modest, as in 1994; the other is the period in which the major booms last for two years, and the main soaring time in the previous year was in the fourth quarter, the second year, or It continued to rise for the last six months and peaked, or peaked at the end of the fourth quarter and the following year after the sharp adjustments in the second quarter, such as 1988 and 1979. In this economic cycle, the mode of LME aluminum price soaring is similar to that of 1978 and 1979. LME aluminum prices may peak in the previous quarter in 2005. Pipeline analysis In some cases, the price is confined to two parallel lines. One is the basic trend line and the other is the pipe line. When this happens, if the analyst judges it timely, it is profitable. After drawing an upward trend line on September 3, 2004 and October 13, 2004, after drawing a pipeline line parallel to the uptrend line on October 8, 2004, the pipeline line can be used to predict the period of time in the future. LME aluminum price target price. For some time in the future, LME aluminum prices should be run to the upper right of the pipeline, will be subject to stronger pressure, the target price is expected to be 1930 ~ 1980 US dollars / ton. At the same time, LME aluminum prices have skyrocketed since 2003. The lower point is the price of 1,300 U.S. dollars per ton on October 8, 2002. The higher point is the forecast price of 1980 U.S. dollars per ton that may have occurred in the previous quarter of 2005. The rate is 680 US dollars / ton, calculated from the top, its 0.382 and 0.618 golden cut positions were 1,720 US dollars / ton and 1,540 US dollars / ton. If the aluminum price of LME fell from the 1980 US$/ton price in 2005, there will be repeated prices at the price of 1,720 US dollars/ton, but the support is not strong, there will be strong support at 1540 US dollars/ton, and there may be a strong rebound. Exploring Price First—Comprehensive Analysis of Price Trends The above analysis only reveals the characteristics of time, direction, and magnitude of LME aluminum prices in 2005. From a single perspective, there may be a certain degree of one-sidedness, so it is necessary to combine the above conclusions to examine. A comprehensive analysis of the global aluminum production (supply), demand and global economic growth rate is expected to face greater downward pressure on aluminum prices in 2005. According to predictions from Standard Bank, Goldmansachs, and the United Kingdom Commodity Research Institute (CRU), LME aluminum prices will run at a level of 1,750 U.S. dollars per ton in 2005, and the top is more likely to occur in the first half of the year. The bottom is at the end of 2005. . Because the aluminum market at home and abroad is intertwined, the domestic and international aluminum market's adjustment of the balance between supply and demand is relatively short under the circumstances that the domestic fundamentals have not changed very much. At this time, the aluminum prices at home and abroad are generally the same. In the case of radical changes in the domestic fundamentals, the adjustment process of supply and demand balance in the aluminum market at home and abroad will take a long time. At this time, the trend of aluminum prices in Shanghai may break away from the trend of aluminum prices of LME, and the unique market conditions will emerge. It is expected that in 2005 China Aluminum will not see such a large change in the 2003 export tax rebate policy. Therefore, the aluminum price movement of Shanghai should be roughly equivalent to that of LME aluminum. The top will appear in the previous quarter in 2005 and the bottom will appear at the end of the year. However, taking into account pressures such as the cancellation of export tax rebates, the introduction of export tariffs, and the appreciation of the renminbi, Shanghai Aluminum prices may decline faster when LME aluminum prices fall; LME aluminum prices will rise, and Shanghai aluminum prices will rise much faster. LME aluminum prices rose, and even reversed movements.