How to view the joint reduction of 800000 tons of

How to treat the joint reduction of 800000 tons of electrolytic aluminum production capacity

on December 21, domestic electrolytic aluminum backbone enterprises held a symposium to reduce another 800000 tons of electrolytic aluminum production capacity in the future. It is difficult to know the final implementation of the meeting. We try to sort out the time point and effect of the previous joint production reduction, and try to evaluate how the 800000 ton reduction will be implemented in combination with the current production reduction results

main conclusions:

1) combing the previous joint production reduction meetings, it is found that the active production reduction of the industry often occurs before the joint production reduction initiative is issued at the meeting, which is generated by market regulation. The binding force of the meeting on industrial development remains to be discussed, with specific reference to the capacity changes in 2016

2) according to the information released at present, it is considerable to reduce the output by 800000 tons, but the details are not clear. Who will reduce the output and how long it will be completed still need further confirmation

3) in 2018, however, from the perspective of the scale of production reduction, it did produce a reduction of more than 3million tons, but it was not fully reflected in the production capacity. At present, the production capacity in progress is reduced by 500000 tons from the peak in August, which is still a certain gap compared with the production capacity at the bottom of the aluminum price reversal in 2008 and 2015

I. on December 21, the backbone aluminum enterprises discussed the joint production reduction again

1.1 event

Antaike released the news: the elongation at break or elongation at yield given in gb13022 (9) 1 "test method for tensile properties of plastic films" in 2018（ ε On February 21, China Nonferrous Metals Industry Association held a symposium for some key electrolytic aluminum enterprises in Nanning, Guangxi, to discuss the current situation of alumina and electrolytic aluminum industry at home and abroad, as well as the future development trend of aluminum consumption. 20 backbone electrolytic aluminum enterprises including Chinalco group, China Hongqiao, Xinfa group, Hangzhou Jinjiang Group and Oriental hope attended the symposium. Experts from Beijing Antaike Information Co., Ltd. were invited to make a research report on the aluminum market

participants reported that the current domestic aluminum price has hit the industry's average cash cost line, and the operating pressure of enterprises is close to the limit, even exceeding the worst level in the fourth quarter of 2015. Since the second quarter, some enterprises have begun to take flexible production measures, especially in the second half of the year, the scale of production reduction has further expanded. It is estimated that up to now, the shutdown capacity of electrolytic aluminum in China has exceeded 3.2 million tons/year, of which about 80% are concentrated in the second half of the year. The scale of domestic planned shutdown may exceed 800000 tons/year in the future

the participating enterprises are full of confidence in the steady and positive growth of China's economy in 2019, and are firmly optimistic about the prospect of China's aluminum consumption. In order to ensure the stable and healthy operation of the industry, the participants put forward suggestions on adjusting the import and export policies of electrolytic aluminum, continuously expanding the application of aluminum, and creating a fair and reasonable financial credit environment

1.2 disk performance

on the day of the meeting announcement, the main contract 1902 of Shanghai aluminum was stronger within the day, but it was not boosted by the news and recorded a very high increase. As of 14:25 p.m., Shanghai aluminum 1902 rose 0.51%. It can be said that the plate is called the yield of materials, and the response to the news is relatively calm

since December, the aluminum price has been in a low and volatile state. On the one hand, the number of production reductions in the electrolytic aluminum industry has increased since the beginning of the month, and on the other hand, the downstream production can still be maintained at the end of the year, there is no cliff like shrinkage, and the destocking is still continuing. However, as investors are not optimistic about the prospects of economic growth and electrolytic aluminum consumption in 2019, and their willingness to go long is not strong, aluminum prices appear in a state of low volatility

the meeting on the 21st will reduce 800000 tons on the current basis. The absolute amount is very considerable, but the market response to this is flat. It is necessary for us to sort out the situation and effect of joint production reduction over the years

II. Background and effects of previous industrial joint meetings

2.1 previous joint meetings of aluminum enterprises

while China's electrolytic aluminum is growing rapidly, the supply growth rate exceeds the consumption growth rate from time to time. When the aluminum price is weak for a long time and the industry losses continue for a long time, most of the backbone electrolytic aluminum enterprises in the industry are convened by the non-ferrous metal association to discuss countermeasures. We combed several major industry conferences in recent years, and looked at the dynamic adjustment of the industry and the price table after the conference

2.2 industrial changes and price performance after the meeting

analyze the background and effect of the joint meeting through the industrial capacity changes and price performance before and after the meeting time point

this kind of electronic tensile testing machine is widely applicable. During the 2008 financial crisis, the industry initiated the goal of gradually completing% production reduction in one month. According to the monthly electrolytic aluminum data of the National Bureau of statistics, after the meeting, due to the unilateral rapid decline in aluminum prices, the aluminum industry, which has been losing money for a long time, successively shut down production capacity, and the output reached the place in the first quarter of 2019

in December 2015, the initiatives launched by the industry joint meeting included expanding the scale of flexible production, delaying the new production for one year, and even discussing the commercial collection and storage, with the scale of transmission, collection and storage reaching 1million tons. After the meeting, the production capacity was reduced by 200000 tons on the basis of December, and the phased production capacity bottomed out. Before the meeting, after the high point of aluminum price in 2011, that is, the batch inspection and sorting of springs on the appropriate production line, the aluminum industry experienced a situation of rapid expansion of production capacity, declining corporate profits, and increasing losses. Before the meeting, the industry had begun to reduce production. The production capacity in progress was reduced from 31.94 million tons in July 2015 to 30.16 million tons in January 2016, minus 1.78 million tons, a range of 5.57%

it is worth noting that the industry joint production reduction meeting took place after the capacity adjustment, which is more a market behavior driven by industry profits; It is said that the new production capacity will be put off for more than one year. In fact, a new round of production capacity will be put on in May 2016. In the case of profitability, the previous agreements are no longer so important

from the perspective of the scale of production reduction alone, it is true that the cumulative scale of production reduction has exceeded 3million tons since the beginning of 2018, but we still need to see the resumption of production after March and the slow but ongoing new production. Since July, the domestic electrolytic aluminum industry has begun to reduce production to varying degrees, and the scale of monthly production reduction has been enlarged (see the annual report for details). However, due to the dilution of some production reduction effects due to the introduction of new capacity, the domestic production capacity in progress has increased from a high of 37.567 million tons in August 2018 to a low of 37.045 million tons in November, minus 522000 tons, with a range of 1.39%, which is a gap from 2015 and 2008. If the reduction of 800000 tons can be realized, it will achieve 800000 tons +522000 tons =1322000 tons, a reduction of about 3.52%. The reduction will bring great changes to the aluminum market and aluminum price

from the perspective of the scale of production reduction alone, it is true that the cumulative scale of production reduction has exceeded 3million tons since the beginning of 2018, but we still need to see the resumption of production after March and the slow but ongoing new production. Since July, the domestic electrolytic aluminum industry has begun to reduce production to varying degrees, and the scale of monthly production reduction has been enlarged (see the annual report for details). However, due to the dilution of some production reduction effects due to the introduction of new capacity, the domestic production capacity in progress has increased from a high of 37.567 million tons in August 2018 to a low of 37.045 million tons in November, minus 522000 tons, with a range of 1.39%, which is a gap from 2015 and 2008. If the reduction of 800000 tons can be realized, it will achieve 800000 tons +522000 tons =1322000 tons, a reduction of about 3.52%. The reduction will bring great changes to the aluminum market and aluminum price

III. summary

1) combing the previous joint production reduction meetings, it is found that the active production reduction of the industry often occurs before the joint production reduction initiative is issued at the meeting, which is generated by market regulation. The binding force of the meeting on industrial development remains to be discussed, with specific reference to the capacity changes in 2016

2) according to the information released at present, it is considerable to reduce the output by 800000 tons, but the details are not clear. Who will reduce the output and how long it will be completed still need further confirmation

3) in 2018, however, from the perspective of the scale of production reduction, it did produce a reduction of more than 3million tons, but it was not fully reflected in the production capacity. At present, the production capacity in progress is reduced by 500000 tons from the peak in August, which is still a certain gap compared with the production capacity at the bottom of the aluminum price reversal in 2008 and 2015