I. Interpretation of the market In recent days, the fundamentals of Shanghai Aluminum have been lackluster, and positions and trading volume have increased. At present, domestic aluminum prices are in the low-cost zone. The renminbi rate hike and export tax rebate policy that have been buzzing in the early stage are already clear. Inventories are constantly being digested. The initial effect of export tax rebates has led to a gradual boom in domestic aluminum consumption, but there are a large number of domestic hedges. Make the market under pressure. In the LME market, despite the fact that the December contract was substantially lightened due to the maturity of the delivery, the existence of a large number of short positions in the January contract and the lack of optimism in the premium situation made us doubtful about the aluminum price's recent upward trend, and on January 1st next year. Before China's export tax rebate policy will also suppress the external disk in the short term. As for last Friday's market, a decrease in the position of the stock market indicates that the funds have short-term operations. Second, the market outlook judged that there was a gap in the supply and demand of alumina and electrolytic aluminum, and the growth rate of aluminum consumption was still high, and the aluminum price in the previous period was probably underestimated. Many factors convinced us that the price of aluminum will surge again in the first quarter of next year. However, due to the fact that most new alumina production capacity will be put into production by the end of 2005 this year, the shortage of alumina will be eased, and export tax rebates will also cause partial domestic backlog of electrolytic aluminum. Therefore, aluminum prices are expected to fall somewhat in the second half of next year. III. Judgment basis Lido factors 1. Cost support Due to the large investment in alumina production capacity, the slow performance and considerable risks, the expansion rate of alumina production capacity is much lower than the growth rate of electrolytic aluminum production capacity. Even if the capacity increased to the expected 7 million tons in 2005, according to the speed of expansion of electrolytic aluminum, the alumina supply may still be in short supply throughout the year. At the same time, capacity constraints, power bottlenecks, and cost support will continue to exert their power. 2. The supply and demand situation is improving Although the current global aluminum smelting production capacity is in excess, due to insufficient supply of alumina and strikes and other factors, the utilization rate of primary aluminum production capacity is very low. As China’s second largest aluminum exporter and domestic economic development needs, global supply and demand for aluminum have turned from surplus to a shortage in 2004. The annual shortage is expected to be 420,000 tons. The situation in 2005 is expected to change, but the supply and demand gap still exists. . Negative factors 1. Capacity release Economic growth slowdown After 2005, with the release of new alumina and electrolytic aluminum production capacity, global primary aluminum will cover the supply and demand gap, and there may be surplus phenomenon, which is in line with the cycle of economic operation. Moreover, the world economic growth rate has also slowed this year, and the demand for primary aluminum will show a declining trend year by year. 2. Excessive copper-aluminum price spreads need to return to any commodity prices subject to the same economic environment as the global economic conditions, exchange rate changes, and national macroeconomic policies. Therefore, there are convergences between alternative products based on relatively stable cost differentials. Sexual and periodical trajectories. By studying the historical data of copper-aluminum spreads, we find that copper-aluminum spreads are running between 1,500-10,000 yuan/ton most of the time, and less than 1,500 yuan/ton or more than 10,000 yuan/ton will cause the return of copper-aluminum spreads. Copper and aluminum spreads reached 12,470 yuan / ton, spreads need to return. Neutral factors According to sources on December 7, Xiao Chunquan, Director of the Metallurgical Department of the National Development and Reform Commission of China stated that China will cancel the 8% aluminum export tax rebate next year. The impact of export tax rebate policy on the domestic aluminum industry needs to be viewed from different periods in the long-term and short-term. In the short term, before the implementation of the policy, the speed of domestic aluminum electrolytic exports will be accelerated, which will benefit the domestic market. After the implementation of the policy, it will lead to a backlog of domestic stocks, which will benefit the foreign market. The overall situation is a major restructuring of the aluminum industry. It will help improve the international competitiveness of domestic aluminum plants. In summary, with the continuous digestion of inventories, the pressure on LME's empty single orders is gradually dissipated, and aluminum prices will continue to rise under the impetus of funds. Date: 2004-12-21