# PRIMARY ALUMINUM MARKET

Since 2021, benefiting from extensive vaccination of COVID-19 vaccines and increased fiscal stimulus in the US, Japan and other countries, positive outlook has been seen in global economy, the repressed consumer demand has been released, the manufacturing industry has continued to expand and demand for base metals has rebounded rapidly. Due to the influence of the pandemic, production of and investment in global commodity including base metals have slowed down, causing the growth of supply to fall short of that of demand, resulting in a phased gap in supply and a sharp rise in commodity prices. Prices of base metal products hit multi-year highs, some even record highs.

In the international market, the robust recovery in overseas demand once the pandemic being gradually contained has led to a period of tension in aluminum supply, prompting a rise in aluminum price in London. At the same time, China came up with “dual carbon” goals, which stimulated capital market to adopt aluminum as long allocation resources, the domestic and overseas aluminum price formed a trend of resonance rising. In the first half of 2021, the average prices of current month aluminum futures and three-month aluminum futures at LME were USD2,269 per tonne and USD2,258 per tonne, respectively, representing a year-on-year increase of 37.4% and 39.0%, respectively.

In the domestic market, in early 2021, despite the elevated commodity prices driven by the unprecedented liquidity easing environment, the domestic aluminum price nosedived in January due to the outstanding problems of contradiction of excess supply occurred in virtue of the impacts of factors such as concerns about the significant growth of aluminum supply, limited production of aluminum fabrication enterprises in Henan and other regions because of environmental issues and combined with massive inflows of imported primary aluminum. In February, on the context of the firm promotion of carbon peak and carbon neutrality of the State, aluminum, as the largest non-ferrous metal in carbon emissions, was frequently under the market spotlight. Moreover, measures such as the dual control of energy consumption and suspension of or limitation on production in Inner Mongolia region and the emergency off-peak use of electricity adopted by enterprises in Yunnan province as a result of the tight situation of electricity supply caused the maximum production reduction of electrolytic aluminum to reach 1.2 million tonnes per year; dual control of energy consumption in Guangxi and Guizhou has also led to delays in construction progress and partial decrease in the output of new projects. In the meantime, the stimulus package worth up to USD1.9 trillion launched by the US poured massive funds into the aluminum market where supply continues to tighten. The domestic price of aluminum increased to RMB20,445 per tonne in early May, hitting a 13-year high. As the adverse impact brought about by the sustained high raw material prices became more and more prominent, the domestic electrolytic aluminum price began to decline gradually in late May under the policy of stabilizing prices such as the joint talks among the five departments under the Chinese government and key manufacturing enterprises of iron ore,