光大期货 研究团队
May, 2015, Qingdao
Nonferrous Metals Research Team of
Everbright Futures

Content
1.Macro-economic factors
2. Fundamentals
3. Market Game
4. Conclusions p 2

p 3

The economy in EU-U.S. is tepid.
p 4

China’s economy becomes weak and the stimulation is strengthened.
p 5

The U.S. capital market has entered adjustment period.
•
The 10-year treasury yield has stopped falling and stabilized.
• Dow Jones Index shocks at the higher level.
• The dollar index has began to adjust.
p 6

p 7

The growth of global aluminum capacity is ahead of that of aluminum production for one year.
(Coefficient of association)
Global aluminum production
Global aluminum capacity
0.34
Global aluminum capacity
(Ahead for one year)
0.49
p 8

The aluminum price is ahead of the utilization of global aluminum capacity for two months.
(Coefficient of association)
Capacity
Utilization
LME Aluminum
Price
0.74
Ahead for two months
0.85
Ahead for one month
0.81
p 9

Supply summary
 The growth of global aluminum capacity is ahead of that of production for one year. The global aluminum capacity expanded gradually in Q2,
Q3 and Q4 of 2014, therefore, the production in Q2, Q3 and Q4 of 2015 will increase gradually and significantly as well;

The global aluminum price is ahead of utilization of aluminum capacity for two months, although the aluminum price was low in Q1, as the cost was reduced, the utilization of aluminum capacity has remained increase slightly in Q2, and it may continue to keep in the higher level in Q3.
 The global aluminum production in Q2 will see pick up and the supply pressure in Q3 will be heavier than that in Q2.
p 10

The growth of aluminum consumption is closely related with the growth of GDP and IP.
(Coefficient of association) GDP
Aluminum consumption growth in the U.S.
0.90
Aluminum consumption growth in China 0.69
IP
0.91
0.77
Fixed-asset investment
(Lagging for three quarters)
0.41
p 11

The distribution of downstream demand for aluminum p 12

The coefficient of association between China real estate index and aluminum consumption growth p 13

The relation between China real estate index and aluminum consumption growth p 14

The influence of automobile and transportation equipment manufacturing industry on aluminum consumption p 15

Other influencing factors on the demand for traditional aluminum
Downstream orders
Corporate liquidity
Corporate profi t
Outlook for aluminum price
？ p 16

Demand Summary

Both the cement output data and the real estate sales data show that the growth of aluminum consumption in Q2 and
Q3 is hard to speed up significantly;

The tense liquidity and low profits of downstream enterprises will continue within 2015;

Most enterprises hold negative attitudes on outlook for aluminum price;

The demand in Q2 sees improvement compared with that in
Q1, but it has not reached the level of peak season. It is expected that the demand in Q3 may be even weaker.
p 17

p 18

Stable equilibrium and unstable equilibrium
Unstable equilibrium
Stable equilibrium p 19

The analysis of market game
First: Prices can adversely affect the action of market participants while the action of market participants will affect the prices as well.
Aluminum price
Equilibrium state
Supplier 1 Supplier 2
High Unstable
Full production, selling off spot inventory and short futures hedge.
Full production, selling off spot inventory and short futures hedge.
Medium
Low
Sub-stable
Stable
Continuing to produce and hold spot inventory and rare futures hedges.
Significantly reducing production and no futures hedge.
Continuing to produce, accelerating inventory turnover and rare futures hedges.
Significantly reducing production and no futures hedge.
p 20

Analysis of market game
High
Medium
Low p 21

Analysis of market game
Second:
Some smart participants from large companies can foresee the
“First” situation, the aluminum price of high level will lead to unstable equilibrium and short positions in the market will increase significantly.
Pushing the aluminum price to the high level equals to helping others and making contribution for other colleagues of this industry.
Therefore, keeping the aluminum price at the medium level is favorable to both maintaining the balance and guaranteeing self-interest.
p 22

Analysis of market game
Third:
A small part of smart participants can not only foresee the
“First” situation, but also they have analyzed the “Second” situation.
Therefore, these participants will have a two-track plan, on the one hand, appropriate short selling at the mid-high level of aluminum price; on the other hand, when the price increases sharply, these participants will intensify hedging decisively according to their own profit situations to lock the enterprises’ profits over a period of time in the future.
Fourth, Fifth …………… p 23

p 24

Conclusion

The supply of aluminum in Q2 of 2015 is slightly over surplus, but the supply in spot market is a little tighter due to some suppliers being reluctant to sell out, and the aluminum price remains firm;

The market supply will see upward gradually in H2 of 2015 and demand is expected to improve hardly, therefore, the supply will see severe surplus when compared with Q2, it is hard for suppliers to absorb the surplus inventory and the aluminum price is likely to shock to the weaker level;

The cost reduction will lead to the falling of aluminum price for H2 in 2015.
p 25

Market is right for most of the time;
But sometimes it makes mistakes.
Seize the chance to make right decisions when it makes mistakes.
p 26

• Everbright Futures Research Institution Maili Xu
• Qualification Certificate No. : F0292919
• Investment Consultation Certificate No.: Z0000609
• Tel.: 15902177850
• E-mail: Xuml@ebfcn.com.cn
p 27

The information of this report is based on the public data, we do not guarantee the accuracy and integrity, nor do we guarantee any change of the information. We have tried to make it objective and impartial, but the opinion, conclusion and suggestion are all for your reference. The opinion and information cannot form the operating basis for the stated product; any investment decision made by the investors has nothing to do with our company and the author.
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