Potential downside risk of Aluminum Market 

From January to May in 2017, the domestic and foreign aluminum price in the Chinese electrolytic aluminum supply side reform as well as the global aluminum market supply and demand relations improvement anticipation and so on factor, overall assumes the high concussion pattern. Although aluminum during this period has become one of the relative resilience of the commodity market, but with the industry business conditions continue to improve, the market potential supply risk has increased; at the same time, the complicated domestic and international macroeconomic situation and other factors, but also to the aluminum consumption growth during the year to bring some variables.
According to the statistics, 2017 1-4 month cumulative Chinese electrolytic aluminum production reached 12 million 200 thousand tons, an increase of 19.5%, the highest level in nearly five years, while the China aluminum apparent consumption growth reached 11%, in the context of booming production and demand, the domestic aluminum market supply and demand contradiction of overall stabilization. Nevertheless, we believe that the potential risk of the future aluminum market is still relatively large, mainly in:
1. Electrolytic aluminum industry operating in good condition, capacity growth, driving force is stronger. According to the statistics, as of May 2017, China aluminum weighted average full cost about 13300 china yuan / ton, the current price, about 80% of domestic electrolytic aluminum production capacity operation is profitable, such as considering previous alumina prices and other factors, the future of domestic electrolytic aluminum enterprises operating costs there is still some room for improvement. In the face of continued improvement in industry efficiency, part of the electrolytic aluminum production capacity has been restarted, while some new projects in line with industrial policies have entered the stage of delivery.
According to the statistics, as of May 2017, China operation of electrolytic aluminum production capacity of about 38 million tons / year, an increase of approximately 4% over the beginning of this year; the domestic and planned electrolytic aluminum production capacity of about 700 thousand tons / year, the new project is located in Inner Mongolia, Guangxi, Guizhou and other places in the construction and production with fast pace. We believe that, if the above incremental, according to plan gradually put forward, the future of China’s electrolytic aluminum market supply growth or far exceeding market expectations.
2. Electrolytic aluminum supply side policy landing process and market supply rhythm or stage mismatches. On April 2017, the national development and Reform Commission, the Ministry of industry, the Ministry of environmental protection and the Ministry of land and resources jointly issued the special action program for the rectification of illegal projects in the electrolytic aluminum industry. At present, the policy proposal has been published for more than a month, but the biggest focus of market concern, “illegal total amount” is not clear. Taking into account the current point of time, the market has appeared considerable aluminum electrolysis increments, the future of the supply side of electrolytic aluminum policy landing or difficult to improve short-term market supply and demand contradictions.
3. The macroeconomic situation and the trade environment are complex and changeable, and there is a certain variation in the growth of aluminum consumption. Since the beginning of the year, the macroeconomic data in China has been generally stable, while some of the industry’s micro data performance has also brought some support to the growth of aluminum consumption. But in the face of the continued tightening of monetary policy, the domestic manufacturing industry in the future and infrastructure investment prospects is still not optimistic; especially with the continued decline in real estate sales and investment growth, this year does not rule out the transfer to the transportation, durable goods and other areas, the domestic aluminum consumption growth to a certain restriction. At the same time, in the past two years, the complicated and changeable international trade environment also has some influence on the export of  chinese aluminum extrusions products. Following the 332 survey in 2016, 2017, the U.S. government for the China aluminum industry has launched 232 investigations at home and abroad of aluminum trade friction heats up the moment, the future prospects of Chinese aluminum exports there is greater uncertainty. Taking into account the current aluminum export in China aluminum consumption in the proportion of factors, the growth of aluminum consumption during the year is expected to also bring certain variables.