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After the plunge at the beginning of the month, aluminum prices at home and abroad have been consolidating. The economic growth of the major industrialized countries and regions may slow down, especially the Chinese factor, and the frequent changes have played an important role in domestic and foreign aluminum prices. Afterwards what exactly is the situation, I try to analyze from the following aspects. First, the economic situation of the major industrialized countries is getting better. 1. The US Federal Reserve’s Beige Book shows that the US economy maintained growth in September and early October. The Beige Book stated that there are signs that high energy prices have inhibited consumer spending and business investment. Although companies in most regions are still concerned about the continued rise in energy and other costs, an increasing number of manufacturers and service providers have indicated that they may pass on new costs to consumers. Even so, the rise in wages and retail prices usually rise moderately. The Federal Reserve stated that the signals for the delivery of reports on consumer spending were uneven, but that the level of expenditures in most regions appeared to have risen due to the modest increase in capital expenditure and the slight rise in the number of employed people. Although oil prices continue to climb, the Fed may still maintain a modest rate hike. The market is widely expected that the Fed will raise interest rates again on the November 10 policy meeting. Since June, the Fed has raised interest rates by 75 basis points. The federal funds rate is currently 1.75%. 2. EU Reuters survey shows that due to the sharp rise in the euro exchange rate, high oil prices, and poor economic growth prospects, the possibility that the European Central Bank will raise interest rates before the end of the year is almost zero, and may be maintained for a longer period of time The interest rate remains unchanged. The 64 economic analysts surveyed on 25-27 October all expected that the ECB will maintain the target buyback rate at the next meeting on November 4 at a historic low of 2%. Regarding whether or not to raise interest rates, of the 62 analysts who responded, only two expected the European Central Bank to raise interest rates this year, compared with nine in the previous month's survey. Twenty analysts expect to raise rates next time in this survey. The time for the next quarter depends on the previous quarter, and the 21 is expected to be in the second quarter of next year. 3. The People’s Bank of China decided to increase the benchmark deposit and lending rates of financial institutions and liberalize the floating range of RMB lending rates and allow RMB deposits from October 29, 2004. The interest rate is floating. The benchmark interest rate for one-year deposits of financial institutions increased by 0.27 percentage point, from the current 1.98% to 2.25%, and the one-year benchmark interest rate was raised by 0.27 percentage points from the current 5.31% to 5.58%. The interest rates of other grade deposits and loans have also been adjusted accordingly, and the medium- and long-term upward adjustments have been larger than the short-term ones. 4. From the economic situation of the United States and the European Union, despite the high energy prices and the impact of exchange rates, there is still potential for rapid development. The demand for metal is stronger. However, China’s increase in interest rates indicates that China’s aluminum demand will decline. Second, the high oil prices have a negative impact on the global economic outlook Senior policy makers have warned recently that the price of crude oil is unlikely to quickly drop from the record high, high oil prices began to have a negative impact on the global economic outlook. At present, the oil price has exceeded the record high of 55 US dollars per barrel and reached a new record high. It has risen more than 70% during the year. Most observers expect that oil prices will not drop significantly in the short term. The World Trade Organization (WTO) stated that although high oil prices have so far not been a barrier to economic activity, it may inhibit economic growth and global trade in 2005. Both rich and poor countries will feel the impact of oil prices in 2005. The IMF is expected to reduce its estimate of global economic growth in 2005. Its current estimate is 4.3%. IMF Vice President Cases said on Monday that "we think that the global economic growth may even be slower, considering the recent trend of oil prices." European policy makers pointed out that rising oil prices are hurting the economic outlook of the region. Luxembourg's Prime Minister and Finance Minister Jacques said one day ago that the European Union (EU) adjusted its 2005 economic growth rate forecast from 2.3% to 2%, due to high oil prices. The European Central Bank (ECB) President Trichet also issued a similar warning: "If oil prices continue to remain high, or even further increases, it will hurt the strength of economic growth in the euro zone and beyond," Trichet said in the annual report of the European Parliament He expects that the economic growth rate of the euro zone will be around 2% in the coming months. High oil prices will have a negative impact on the global economy, but the main reason is to slow down the global economy and it cannot hinder the growing momentum of the global economy. III. Output Analysis 1. China's output growth rapid preliminary data show that in September China's aluminum annual production reached 6.8 million tons. China produced 560,000 tons of aluminum in September, equivalent to an annual rate of 6.8 million tons or more, a high monthly productivity since 1995 (starting from 1995, China's monthly productivity has gradually increased), and it is quite different from other months. This means that our estimate of the 6.8 million tons of production in 2005 is really too low. 2. The consolidation of China's aluminum industry is positive for global aluminum prices The annual growth rate of China's primary aluminum will slow by 10% in the next two years, which is lower than the growth rate of 15%-20% in the past three years. This is mainly due to the limited supply of raw materials, energy prices and the actual operating rate of the three major factors leading to the situation, and the long-term existence of these factors may also change the current domestic oversupply situation. The main limitation comes from energy issues. We know that aluminum is much more dependent on energy than other industrial metals. In China, energy costs generally account for 45% of primary aluminum production costs, which is much higher than the 16% of Canada. The problem of domestic energy shortages is not a temporary phenomenon but an industrial structural problem. The rise in energy costs not only occurs in China, but also does not occur only in one part of the energy industry. We have seen that the prices of natural gas, coal, and oil are all rising. This situation is difficult to improve before 2006. At the same time, for the electrolytic aluminum industry that has just undergone the industry reshuffling, it will face a phased problem - the lack of operating rate. In order to curb excessive speculation in the electrolytic aluminum industry, it is estimated that 500,000 tons of pollution capacity will be shut down by this year and 1.4 million tons of capacity will be shut down by the end of this year. However, these capacities will actually increase due to the application of new technologies, so that the capacity to be shut down in the second half of this year will increase by 500,000 tons. The data also indicates that the closure of production capacity has caused China's output growth rate to decrease by about 12% in August, falling from the average level of over 25% in the past three years. The operating rate of electrolytic aluminum plants in China has been reduced from 97% last year to 90% this year. The operating rate in 2005 and 2006 is likely to drop to 85%. In addition, a part of the reason is due to the increasingly heavy pressure on domestic aluminum exports. At the beginning of this year, the export tax rebate for aluminum was also reduced from 15% to 8%, which has a great impact on aluminum exporters and reduces corporate profits. The unresolved issue of the complete cancellation of export tax rebates will again reduce the total amount of future exports. Therefore, it can be inferred that China's exports in 2005 and 2006 will be much lower than in 2003. As the world's largest exporter of primary aluminum, the reduction in China's export supply will increase the supply and demand contradiction in the global aluminum market. 3. Global supply shortages support higher alumina prices Traders and analysts said that the impact of Hurricane Ivan's lingering effects and the global supply shortage will keep the current high global alumina prices at least for another year. This will support global aluminum prices. According to industry sources in Australia’s industrial sector, due to the severe damage caused by Hurricane Ivan to Jamaica’s alumina facilities last month, the spot price of alumina shipped from Australia is still far higher than August’s level. According to a recent report from the Macquarie Bank, in recent weeks, according to FOB terms, the alumina price at the port of shipment for Australia has exceeded 400 US dollars/metric ton, and the price has risen to 420 US ton/ton at the time of the higher price. Traders said that the current price is 390 US dollars / ton -410 US dollars / ton. Although this price is already lower than the high level in the second quarter, alumina prices have remained above the range of US$300/tonne-340 US$/tonne announced two months ago. Australia is the world’s largest producer and exporter of alumina. Its alumina raw materials are mainly exported to China, the world’s largest alumina importer. 4, aluminum prices upside down widened aluminum Asian aluminum prices fell on October 21 news: As of the end of Wednesday within a week, due to the recent aluminum contract upside down widened, spot aluminum prices in Asia based on the spot price of aluminum fell back. Traders pointed out that aluminum supply in Asia is not very tight at present, and that the Japanese ports and LME's aluminum inventories in Singapore are more direct evidence. Some traders pointed out that the current spot price of aluminum prices in March is upside down at 69.50 US dollars per ton, and the extent of aluminum price inversion will quickly narrow in the future. The current aluminum price hike is mainly due to the large number of short positions in the aluminum contracts that were delivered in October. As current consumer companies do not have too high recent aluminum demand, the high spot aluminum prices will allow sellers to lower aluminum prices. With the decline of LME aluminum prices in the previous period, traders reported that the inquiry from consumers has rapidly increased, but then the inquiry from consumers has fallen sharply. Therefore, in Singapore, the premiums for aluminum from China, India and Russia continue to fall. At present, the premium for these brands of aluminum is 30 US dollars per ton, which is lower than the previous period of 30-35 US dollars per ton of premium, in early August at 50 US dollars per ton. Moreover, with the increase in aluminum stocks closer to Singapore, it is expected that Asian aluminum premiums will fall further in the next few weeks. IV. Demand analysis 1. The aluminum economy in major economic countries is in better demand At present, various economic data indicate that the pace of global economic recovery has slowed down. However, this is only a temporary fact, not a new trend. Because of the optimistic outlook of other transportation vehicles such as new cars, light weights, and trailers, these can make up for the weakness of the auto industry in recent years; the aerospace industry is also a better buying point, as large manufacturers such as Airbus have recently announced that they will increase their production volume next year. However, the main factor is that the global economic cycle has entered a stage of development. The issue of raising interest rates is not enough to stop the pace of economic development. The initiation of investment and consumption is a major factor in the growth of aluminum market demand. Spot premiums in all major consumer regions in major developed countries maintained growth, reflecting stronger demand and weaker supplies. For example, Japan's contract premium in the fourth quarter reached a high of nine years, exceeding US$90/tonne. 2. Orders for aluminum products from the United States and Canada drastically decreased in September. Orders for aluminum products from the United States and Canada continued to decline sharply in September, according to newer data from the American Aluminum Association. New orders rose by a net 4.4% month-on-month, but declined year-on-year. 2.2%, which is also the first year-on-year decline since May 2003. This marked a significant slowdown in growth rates compared to the beginning of this year, when the annual growth in fixed-term orders was as high as 20%. V. Trade Analysis 1. China's recent export growth Rapid China's rapidly rising monthly productivity explains the reasons for the rise in net exports of aluminum. At the same time, the market also shows us that manufacturers' inventory is decreasing. The two have received mutual evidence. China’s net export of aluminum and aluminum alloys reached 91,000 tons in September, which is a relatively high level since the VAT rebate was cut by half from last year. From January to September, net exports were 281,000 tons, compared with 195,000 tons in the same period of last year. At this rate, China’s net exports this year will exceed the level of 372,000 tons last year. The Singaporean trader said on October 21 that the country's warehouses were filled with Chinese-made aluminum, attracted by the higher London Metal Exchange (LME) spot aluminum prices, and the demand from end-users decreased. As of October 21, LME Singapore warehouses had a total aluminum inventory of 111.8 thousand tons, an increase of nearly 6% from two days earlier. A trader said that all of the aluminum that entered Singapore was from China, and the supply of Western brands, aluminum and Indian aluminum, decreased. Chinese traders said that there have been up to 50,000 tons of aluminum shipped to LME warehouses in Singapore and South Korea. They said overseas traders are urging Chinese aluminum smelters to ship ahead of schedule to take advantage of LME spot aluminum's inverse price difference against three-month aluminum. 2. China's aluminum exports will slow down, but China's domestic aluminum exports are under increasing pressure. The export tax rebate for aluminum fell from 15% to 8% at the beginning of this year, which has a great impact on aluminum exporters and reduces the number of companies. profit. The unresolved issue of the complete cancellation of export tax rebates will again reduce the total amount of future exports. Therefore, it can be inferred that China's exports in 2005 and 2006 will be much lower than in 2003. As the world's largest exporter of primary aluminum, the reduction in China's export supply will increase the supply and demand contradiction in the global aluminum market. Sixth, comprehensive trend analysis At present, from the perspective of the balance of supply and demand of aluminum in the world, demand is still relatively strong, there is still a gap in supply, and it plays a supporting role for LME aluminum prices. On the one hand, the United States and Europe have a better economic situation and support aluminum prices. On the other hand, the supply of alumina is in short supply and the prices are high, which raises the cost of aluminum production and also supports LME aluminum prices. More recently, the domestic aluminum market in China has changed significantly. 1. The recent rapid growth in China's production and the increase in exports have resulted in different results for the domestic and foreign markets. The rapid increase in China's production and the increase in export volume have inhibited the aluminum prices of LME, but cannot change the rising trend of LME aluminum prices, which is reflected in the domestic market. The performance of the relationship between Shanghai aluminum prices and LME aluminum prices has narrowed. However, Shanghai aluminum prices are still in line with the LME aluminum price trend. 2. It is rumored that China may cancel the aluminum export tax rebate, which will reduce the total export volume in the future. As a result, it will improve the aluminum supply and demand balance of LME, support the LME aluminum price, and have a significant inhibitory effect on Shanghai aluminum prices. Shanghai aluminum prices still can not go beyond the LME aluminum prices. 3. The People's Bank of China decided to increase the benchmark deposit and lending rates of financial institutions from October 29, 2004 and relax the floating range of RMB lending rates and allow the renminbi deposit rate to fall. The benchmark interest rate for one-year deposits of financial institutions increased by 0.27 percentage point, from the current 1.98% to 2.25%, and the one-year benchmark interest rate was raised by 0.27 percentage points from the current 5.31% to 5.58%. The interest rates of other grade deposits and loans have also been adjusted accordingly, and the medium- and long-term upward adjustments have been larger than the short-term ones. This shows that the Chinese government has made more efforts to control the soft landing of the economy. This policy has reduced the demand for aluminum in China and may increase the export intensity. It has an inhibitory effect on the aluminum price of LME, but it cannot determine the direction of LME aluminum prices. This policy has a considerable effect on Shanghai aluminum prices, which may cause Shanghai aluminum prices to depreciate from the operation of LME aluminum prices. The time is approximately 15-20 trading days.