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25ga Furring Channel 7/8 Austin Tx.Energy metals and new materials are booming. Real estate downturn superimposes epidemic disturbance, and terminal demand continues to be weak.
Since the second half of 2021, the rapid decline of downstream areas represented by real estate has become the key to the continued downturn in demand for base metals. Due to factors such as the shantytown reform policy and the rapid rise of residents' leverage ratio, the real estate cycle from 2015 to 2020 stayed at the top of the boom for a long time, during which the real estate sales were far higher than the reasonable central level. Once this cyclical overbought faced a reversal, the time and extent of adjustment would also exceed expectations. Therefore, although the real estate policy has been significantly relaxed since November 2021, the decline in sales, investment and completion has not improved. At the same time, the disturbance of the epidemic situation led to a rapid drop in demand in downstream household appliances, automobiles and other fields, and the terminal shipment was not smooth in April May.
The correction of supply policy brought about a drop in profits. Although the demand is weak, we can see that the profitability of electrolytic aluminum has fallen gradually since the fourth quarter of 2021, which is more due to the gradual liberalization of extreme control policies. Since the second half of 2021, although the demand has weakened, the "dual control of energy consumption" has led to a sharp contraction of commodity supply, and the industry profits have risen instead of falling. During this period, the profits of electrolytic aluminum tons have reached a high level of 6000-7000 yuan respectively. However, in 2022, under the background of steady growth, the supply side will gradually rectify its deviation. From January to May, the operating capacity of electrolytic aluminum will increase by more than 2.5 million tons. Under the impact of supply expansion, the profit level dropped significantly: the profit per ton of electrolytic aluminum industry was only about 2000 yuan/ton, far lower than the high at the beginning of the year.
In the past year, the gradual deterioration of demand and supply led to the profitability of steel and electrolytic aluminum moving from the previous super high state to a reasonable or even low level. The pressure released by supply has been fully reflected in the first half of the year. The recovery of smelting profitability in the second half of the year will depend more on the improvement of demand, while commodity demand may have passed the worst stage.
Traditional demand for electrolytic aluminum has declined steadily, and emerging areas are key growth points of demand. Construction, transportation and power electronics are the main consumption terminals of electrolytic aluminum in China, accounting for 28.7%, 23.3% and 17.4% of the total consumption respectively in 2020. At present, China's electrolytic aluminum is in the stage of adjustment of new and old energy demand. The demand for aluminum in the traditional construction real estate field has declined steadily, while the growth momentum of aluminum for transportation, power electronics, packaging, durable consumer goods, etc. in recent years is very strong, and the overall demand for electrolytic aluminum is growing steadily.
The real estate control policy was further relaxed. In view of the rapid downward speed of real estate in the early stage, in order to promote its stable development, local governments have recently intensively introduced real estate support policies, which focus on supporting rigid and improved housing demand through policies such as reducing the proportion of down payment, providing housing purchase subsidies, lowering the interest rate of housing loans, and increasing the amount of provident fund loans. On May 15, 2022, the People's Bank of China announced that the lower limit of the first house loan interest rate would be lowered by 20 basis points, and the first house loan interest rate would be as low as 4.4%. This policy significantly reduced the cost of housing purchase for residents just in need, further releasing the potential of housing demand. The sharp reversal of the real estate policy may not have an immediate effect, but it significantly reduces the risk of further downturns in the real estate market.
Since the second half of 2021, the rapid decline of downstream areas represented by real estate has become the key to the continued downturn in demand for base metals. Due to factors such as the shantytown reform policy and the rapid rise of residents' leverage ratio, the real estate cycle from 2015 to 2020 stayed at the top of the boom for a long time, during which the real estate sales were far higher than the reasonable central level. Once this cyclical overbought faced a reversal, the time and extent of adjustment would also exceed expectations. Therefore, although the real estate policy has been significantly relaxed since November 2021, the decline in sales, investment and completion has not improved. At the same time, the disturbance of the epidemic situation led to a rapid drop in demand in downstream household appliances, automobiles and other fields, and the terminal shipment was not smooth in April May.
The correction of supply policy brought about a drop in profits. Although the demand is weak, we can see that the profitability of electrolytic aluminum has fallen gradually since the fourth quarter of 2021, which is more due to the gradual liberalization of extreme control policies. Since the second half of 2021, although the demand has weakened, the "dual control of energy consumption" has led to a sharp contraction of commodity supply, and the industry profits have risen instead of falling. During this period, the profits of electrolytic aluminum tons have reached a high level of 6000-7000 yuan respectively. However, in 2022, under the background of steady growth, the supply side will gradually rectify its deviation. From January to May, the operating capacity of electrolytic aluminum will increase by more than 2.5 million tons. Under the impact of supply expansion, the profit level dropped significantly: the profit per ton of electrolytic aluminum industry was only about 2000 yuan/ton, far lower than the high at the beginning of the year.
In the past year, the gradual deterioration of demand and supply led to the profitability of steel and electrolytic aluminum moving from the previous super high state to a reasonable or even low level. The pressure released by supply has been fully reflected in the first half of the year. The recovery of smelting profitability in the second half of the year will depend more on the improvement of demand, while commodity demand may have passed the worst stage.
Traditional demand for electrolytic aluminum has declined steadily, and emerging areas are key growth points of demand. Construction, transportation and power electronics are the main consumption terminals of electrolytic aluminum in China, accounting for 28.7%, 23.3% and 17.4% of the total consumption respectively in 2020. At present, China's electrolytic aluminum is in the stage of adjustment of new and old energy demand. The demand for aluminum in the traditional construction real estate field has declined steadily, while the growth momentum of aluminum for transportation, power electronics, packaging, durable consumer goods, etc. in recent years is very strong, and the overall demand for electrolytic aluminum is growing steadily.
The real estate control policy was further relaxed. In view of the rapid downward speed of real estate in the early stage, in order to promote its stable development, local governments have recently intensively introduced real estate support policies, which focus on supporting rigid and improved housing demand through policies such as reducing the proportion of down payment, providing housing purchase subsidies, lowering the interest rate of housing loans, and increasing the amount of provident fund loans. On May 15, 2022, the People's Bank of China announced that the lower limit of the first house loan interest rate would be lowered by 20 basis points, and the first house loan interest rate would be as low as 4.4%. This policy significantly reduced the cost of housing purchase for residents just in need, further releasing the potential of housing demand. The sharp reversal of the real estate policy may not have an immediate effect, but it significantly reduces the risk of further downturns in the real estate market.
