Judging the trend of aluminum prices from the direction of central bank monetary policy
Recently, aluminum prices have undergone two major ups and downs, and the characteristics of price changes are particularly evident. That is, under the constraints of external systemic risks, aluminum prices have completely detached from the fundamentals and have undergone huge fluctuations. From last Friday to last Wednesday, the Shanghai aluminum main contract fell by 7.33%, and since last Thursday, aluminum prices have re-upped 2.68%. This one-off price change tells investors the fact that the market can move out of a wide swing market under the influence of short-term group psychology when it deviates from the fundamentals.
All things in the world are the unity of opposites. The analysis of aluminum prices cannot be an exception. The basic logic structure of aluminum price analysis can be divided into two categories: one is fundamental analysis, which is to study the relationship between supply and demand in the aluminum market; the other is financial analysis, that is, to study the impact of liquidity on aluminum prices. From these two aspects and further analysis, we can also find that there are two aspects of internal unity of opposites.
In terms of supply and demand, aluminum has always been a species that exceeds demand for a longer period of time. This conclusion can be concluded from the high inventory of Aluminum. After the financial crisis, aluminum stocks have grown rapidly. From 1 million tons in mid-2008 to the current 4 million tons or more, aluminum inventories have more than tripled. From an absolute point of view, it is also a huge growth. And when the aluminum stock increased to 4 million tons, it showed strong resilience: from May 18, 2009 exceeded 4 million tons, to 4305125 tons released a few days ago, in spite of repeated occurrences in the middle, ups and downs , but never broke through this level of 4 million tons. China’s aluminum inventories have also rapidly increased from less than 400,000 tons in mid-2008 to a high level of 1 million tons. From the perspective of high stocks, we can clearly conclude that the aluminum market is oversupply and that the fundamentals are not very promising for the aluminum market.
However, if we look at the short-term perspective, in the Chinese market, aluminum will show a good turnaround in the near-term fundamentals. There are two main reasons: One is the improvement of demand. Whether it is real estate or the automotive industry, we have seen rapid growth in the industry. Among them, the real estate industry's sales area, new housing starts in the area has been showing a positive growth trend in the near future, even after the government introduced a series of control policies continue to be the case. After the excellent sales situation in 2009, car sales continued to show rapid growth this year. The continuous increase in aluminum production is a strong testimony to the continuous increase in aluminum demand. The second reason is the compression of supply. Due to the implementation of energy conservation policies, local governments in Guangxi, Guizhou, Henan, etc. have made decisions on the production and production suspension of electrolytic aluminum producers in the jurisdiction within the past period, subject to the The use of energy requires that the growth of aluminum production will be constrained by bottlenecks for a certain period of time. We can see this obvious trend from the output data released by the Metal Color Association or the Statistics Bureau. When demand continues to grow and supply is constrained, we combine the short-term decline in inventory. In the past, the continuous rise in aluminum prices has become a matter of course. Even during the downturn, we can see the strength of aluminum prices. When prices of copper and zinc fell below the limit respectively, the price of aluminum still fell little, and even on the premise that the overall financial market collapsed on November 12, aluminum prices continued to rise in the late afternoon.
Therefore, from the perspective of supply and demand, the analysis of aluminum prices has a long-term surplus and short-term tension contradiction. But this is not the whole analysis of aluminum prices. Due to the increasing development of the financial market, the funding side has increasingly become a key factor affecting aluminum prices. In particular, the trend of China’s central bank’s monetary policy has become an important factor in determining the trend of aluminum prices.
After the financial crisis took place, China has taken two measures. One is to introduce a loose fiscal policy, use 4 trillion yuan of investment to stimulate the domestic economy, the other is to introduce a loose monetary policy, trying to use funds to stimulate economic recovery and development. Loose monetary policy has undoubtedly become a crucial factor influencing the price of aluminum outside supply and demand. In 2009, the financial market showed a bull market, which was undoubtedly inextricably linked to the proliferation of liquidity that led to unbridled monetary policy. The two major crashes this year have also been intrinsically related to the tightening expectations of monetary policy. On January 7, the central bank announced that the increase in the central bank’s issuance of interest rates led to a sharp drop in commodities, including aluminum. After the central bank announced its upward adjustment of the deposit reserve ratio on January 12, aluminum prices fell further. On May 12th, after the central bank announced that it raised the deposit reserve ratio again, aluminum prices fell further, and this undoubtedly worsened the aluminum prices that are expected to be suppressed by real estate control policies. In the near term, the central bank announced a series of policies such as raising interest rates and raising the deposit reserve ratio, which undoubtedly increased the market's expectations of monetary policy tightening. This will likely guide the market again in the coming period and will become an influence. The main factor of the price.
Judging from the current market performance, the market has become increasingly sensitive to the central bank’s monetary policy strategy. Recently, several large price fluctuations are closely related to the timing of the central bank’s policy announcement. Aluminum prices will also be affected by the expectations of this policy within a certain period of time and will likely continue to face the risk of falling prices in the near future. For manufacturers, traders and processors, they should face the risk of possible price declines and respond to them in a timely manner.
All things in the world are the unity of opposites. The analysis of aluminum prices cannot be an exception. The basic logic structure of aluminum price analysis can be divided into two categories: one is fundamental analysis, which is to study the relationship between supply and demand in the aluminum market; the other is financial analysis, that is, to study the impact of liquidity on aluminum prices. From these two aspects and further analysis, we can also find that there are two aspects of internal unity of opposites.
In terms of supply and demand, aluminum has always been a species that exceeds demand for a longer period of time. This conclusion can be concluded from the high inventory of Aluminum. After the financial crisis, aluminum stocks have grown rapidly. From 1 million tons in mid-2008 to the current 4 million tons or more, aluminum inventories have more than tripled. From an absolute point of view, it is also a huge growth. And when the aluminum stock increased to 4 million tons, it showed strong resilience: from May 18, 2009 exceeded 4 million tons, to 4305125 tons released a few days ago, in spite of repeated occurrences in the middle, ups and downs , but never broke through this level of 4 million tons. China’s aluminum inventories have also rapidly increased from less than 400,000 tons in mid-2008 to a high level of 1 million tons. From the perspective of high stocks, we can clearly conclude that the aluminum market is oversupply and that the fundamentals are not very promising for the aluminum market.
However, if we look at the short-term perspective, in the Chinese market, aluminum will show a good turnaround in the near-term fundamentals. There are two main reasons: One is the improvement of demand. Whether it is real estate or the automotive industry, we have seen rapid growth in the industry. Among them, the real estate industry's sales area, new housing starts in the area has been showing a positive growth trend in the near future, even after the government introduced a series of control policies continue to be the case. After the excellent sales situation in 2009, car sales continued to show rapid growth this year. The continuous increase in aluminum production is a strong testimony to the continuous increase in aluminum demand. The second reason is the compression of supply. Due to the implementation of energy conservation policies, local governments in Guangxi, Guizhou, Henan, etc. have made decisions on the production and production suspension of electrolytic aluminum producers in the jurisdiction within the past period, subject to the The use of energy requires that the growth of aluminum production will be constrained by bottlenecks for a certain period of time. We can see this obvious trend from the output data released by the Metal Color Association or the Statistics Bureau. When demand continues to grow and supply is constrained, we combine the short-term decline in inventory. In the past, the continuous rise in aluminum prices has become a matter of course. Even during the downturn, we can see the strength of aluminum prices. When prices of copper and zinc fell below the limit respectively, the price of aluminum still fell little, and even on the premise that the overall financial market collapsed on November 12, aluminum prices continued to rise in the late afternoon.
Therefore, from the perspective of supply and demand, the analysis of aluminum prices has a long-term surplus and short-term tension contradiction. But this is not the whole analysis of aluminum prices. Due to the increasing development of the financial market, the funding side has increasingly become a key factor affecting aluminum prices. In particular, the trend of China’s central bank’s monetary policy has become an important factor in determining the trend of aluminum prices.
After the financial crisis took place, China has taken two measures. One is to introduce a loose fiscal policy, use 4 trillion yuan of investment to stimulate the domestic economy, the other is to introduce a loose monetary policy, trying to use funds to stimulate economic recovery and development. Loose monetary policy has undoubtedly become a crucial factor influencing the price of aluminum outside supply and demand. In 2009, the financial market showed a bull market, which was undoubtedly inextricably linked to the proliferation of liquidity that led to unbridled monetary policy. The two major crashes this year have also been intrinsically related to the tightening expectations of monetary policy. On January 7, the central bank announced that the increase in the central bank’s issuance of interest rates led to a sharp drop in commodities, including aluminum. After the central bank announced its upward adjustment of the deposit reserve ratio on January 12, aluminum prices fell further. On May 12th, after the central bank announced that it raised the deposit reserve ratio again, aluminum prices fell further, and this undoubtedly worsened the aluminum prices that are expected to be suppressed by real estate control policies. In the near term, the central bank announced a series of policies such as raising interest rates and raising the deposit reserve ratio, which undoubtedly increased the market's expectations of monetary policy tightening. This will likely guide the market again in the coming period and will become an influence. The main factor of the price.
Judging from the current market performance, the market has become increasingly sensitive to the central bank’s monetary policy strategy. Recently, several large price fluctuations are closely related to the timing of the central bank’s policy announcement. Aluminum prices will also be affected by the expectations of this policy within a certain period of time and will likely continue to face the risk of falling prices in the near future. For manufacturers, traders and processors, they should face the risk of possible price declines and respond to them in a timely manner.