On one hand, there is the roaring resumption of production by Middle Eastern aluminum plants, while on the other hand, the red line of domestic production capacity is locked. The global aluminum supply is experiencing an ‘East West collision’.

Western Front: Middle East resumes production beyond expectations

According to CCMN platform’s report on July 15th, the resumption of aluminum production capacity in the Middle East exceeded expectations, becoming the core factor of this round of pattern transformation. The regional supply disturbance is being rapidly filled in by local production resumption.

The EGA smelter in the United Arab Emirates has restored 7% of its electrolytic cell capacity, and the alumina plant is expected to recover to 50% in the short term. It is expected to resume full production by the end of the year. Alba and Qatarum, the two major aluminum plants, increased their production by a total of 300000 tons in the second half of the year.

Europe and America simultaneously restart ‘zombie aluminum factories’. New Madrid in the United States and Slovalco in Norway have resumed production, but the ramp up period is long and the increment is limited, making it difficult to achieve tight balance in the short term.

Eastern route: domestic production capacity ceiling locked in

The other end of the supply buffer is domestically. In May, domestic primary aluminum production and semi-finished product exports increased synchronously, easing overseas tensions. But the domestic electrolytic aluminum smelting capacity has approached the policy limit.

This means that overseas resumption of production releases incremental growth, while domestic production is rigidly constrained. The supply structure of “loose in the west and tight in the east” has taken shape, and the pricing power at both ends has quietly changed hands.

The market reaction is differentiated. The main force of Shanghai Aluminum has opened at 23400 yuan/ton today, with a maximum of 23415 yuan/ton. The latest price is 23225 yuan/ton, a decrease of 15 yuan (update time: 12:53). The latest price of Lunan Aluminum is 3184.50 US dollars per ton, up 7.50 US dollars (updated at 12:53).

The average price of A00 aluminum in the Yangtze River spot market is reported at 23180 yuan/ton, a decrease of 90 yuan; The average price for casting aluminum alloy ADC12 is 24000 yuan/ton, and the average price for A356.2 is 23600 yuan/ton. Recently, both the Shanghai Futures Exchange and LME inventories have decreased, weakening the pressure to resume production.

Suspense: Which line breaks the balance first

Who will break the deadlock between the incremental growth in the Middle East and the domestic ceiling first? If the resumption of production accelerates, the global gap may further narrow to below 1.2 million tons. Follow up on the climbing pace of zombie aluminum factories in Europe and America.

The tug of war of tight supply in the east and loose supply in the west will determine the central direction of aluminum prices. The outcome of this two front war may be determined by the speed of inventory turnover.