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External strong internal weak pattern continuation of aluminum price

  • Author:Dong Xing
  • Release on:2018-04-02
From the end of last year to mid-January of this year, LME aluminum rebounded at a rate of 12%, and the previous period saw only a rebound of 3%. There is a huge price gap between London Aluminum and Shanghai Aluminum, which gives investors the opportunity to cross-market arbitrage. Under the background of the current Sino-US trade friction escalation, the high aluminum inventories in China and the low inventory abroad will continue the pattern of external strength, weakness, and weakness in aluminum prices.
  Overseas aluminum ingots(Aluminum battery foil manufacturer) may be in short supply

  President Trump announced this month that it will impose import tariffs of 25% and 10% respectively on imported steel and aluminum. China is a major exporter of aluminum products. Since 2000, the amount of aluminum products exported from China to the United States has grown at a geometric multiple. As of the end of 2017, the amount of aluminum products imported from China by the United States was as high as US$3.7 billion, a 31-fold increase from the US$110 million in 2000.

  If the United States formally imposes an import tariff of 10% on aluminum, then in the absence of a developed aluminum manufacturing industry in the United States, there will be a shortage of overseas aluminum products(3003 aluminum coil on sale) in a short period of time and prices will increase. China's exports of aluminum products have been blocked, and domestic downstream consumption is not yet prosperous, which will lead to an increase in domestic aluminum ingot stocks, and domestic aluminum ingot prices will be relatively weak.

  Inventories show external reductions

   China's aluminum ingot inventory has steadily increased since the end of 2016. From the inventory of the previous period alone, as of March 23, 2018, aluminum ingot stocks were as high as 940,000 tons, a record high. In contrast, LME's aluminum ingot stocks have declined year-by-year since 2014 and dropped to about 1 million tons at the end of last year. Since the beginning of this year, the inventory has increased slightly and is currently around 1.2 million tons. But overall, overseas aluminum ingot stocks are in a relatively low position, which is not the same as the conventional inventory of more than 4 million tons a few years ago. With the recovery of the global economy, the overall demand for aluminum ingots will increase year by year in overseas countries. However, once the trade war starts, China’s exports of aluminum products(5754H22 aluminum plate), which account for half of the world’s output of aluminum ingots, will be partially restricted. If the stock of domestic aluminum ingots continues to rise, foreign aluminum ingot stocks have been at low levels, and the pattern of strong external, internal, and weak aluminum prices will continue.