Aluminum prices slightly declined in January

According to the Commodity Market Analysis System of Shengyishe, as of January 31, 2024, the average price of domestic aluminum ingots in the East China market was 18980 yuan/ton, a decrease of 3.13% compared to the aluminum price of 19563.33 yuan/ton at the beginning of the month (January 1). Aluminum prices have almost unilaterally declined in the first half of the year. On the one hand, due to the approaching holiday, downstream processing enterprises have gradually weakened their production, and spot demand has decreased, leading to an increase in the proportion of ingots in the industry; On the other hand, due to the influence of aluminum oxide prices, aluminum prices fluctuate accordingly.

In the long term, the current price is in the “M” type price state since the second half of 2023, and the price level has been in the upper middle level in the past year.

Fundamentals of supply and demand

In terms of demand, due to the impact of the off-season of consumption, downstream production in China has continued to decline, and there has been no significant improvement in aluminum profile orders. Downstream demand for building profiles is weak, while the production of photovoltaic and automotive profiles in the industrial profile sector is stable.

There are signs of a turning point in social inventory within the month

In late January, social inventory shifted from being depleted on a weekly basis to accumulating on a weekly basis. As of January 29th, the mainstream social inventory of electrolytic aluminum ingots in China is 444000 tons, which is 421000 tons higher than the social inventory on January 22nd and has accumulated 23000 tons; On January 2nd, the social inventory was 446000 tons, and the social inventory in mainstream regions fell first and then rose during the month. Approaching the off-season of downstream demand (the aluminum processing industry is expected to be on holiday from the end of January to mid February), it is expected that demand may continue to weaken, and a turning point in social inventory may come in the short term.

However, social inventory is currently at a low absolute value, with year-on-year data showing a low level for the same period in nearly seven years.

Aluminum prices fluctuated horizontally in February

At the end of January, there were signs of stabilization in aluminum prices. On the one hand, this was due to the aluminum price falling below 19000 yuan/ton, stimulating downstream pre holiday stocking demand. On the other hand, the news about aluminum oxide was positive, and cost support was strengthened.

Inventory data may experience periodic accumulation in February. Currently, aluminum inventory is relatively low year-on-year, and the accumulation phenomenon is delayed and better than expected. At present, the inflow and storage of water in Yunnan during the dry season are better than in previous years, and the possibility of a second round of reduction in production of electrolytic aluminum in the local area has decreased. The long short game intensifies, and the short-term aluminum price fluctuates strongly.

According to the monitoring of the commodity market analysis system of Shengyishe, the prices of industrial grade and battery grade lithium carbonate remained stable and fluctuated weakly in January. On January 30th, the average domestic mixed price of industrial grade lithium carbonate was 91400 yuan/ton, a decrease of 2.77% compared to the average price of 94000 yuan/ton on January 1st. On January 28th, the average domestic mixed price of battery grade lithium carbonate was 100800 yuan/ton, a decrease of 2.14% compared to the average price of 103000 yuan/ton on January 1st.

By observing market changes, it can be seen that the price of lithium carbonate gradually stabilized in early January, and the decline in price continued to decrease. Most companies mainly offered stable prices. In terms of supply, domestic lithium salt manufacturers are still stable in production, and some lithium salt enterprises with smaller production capacity in certain regions have gradually entered a state of production reduction and shutdown since January, resulting in a decrease in the supply of lithium carbonate in the market. After the New Year holiday, some lithium salt companies have reduced their shipping pressure, but their willingness to ship individual items remains sluggish, resulting in a slowdown in the decline in lithium carbonate prices.

In terms of demand, against the backdrop of the decline in spot prices of lithium carbonate and the expected reduction in orders, most positive electrode material companies maintain a low raw material inventory management strategy. There is no willingness to purchase bulk lithium carbonate at high prices in downstream and terminal markets. Some ternary material companies have seen a slight increase in procurement driven by recent orders, while most downstream companies such as positive electrodes have reported no demand for replenishment in the short term. In addition, the overall focus of the market is still showing a downward trend, and market transactions are extremely light. There is a significant price difference between buyers and sellers, and actual transactions are very few.

In late January, the price of lithium carbonate remained stable with slight fluctuations and slightly declined. In terms of supply, with the approaching Spring Festival holiday and the maintenance season of lithium salt factories, lithium salt enterprises did not have any pressure to ship, and their reluctance to sell remained. Lithium salt factories maintained a positive price attitude. In terms of demand, due to the suspension of logistics during the Spring Festival period, enterprises have made purchases in advance to ensure the supply of orders in February. Therefore, inquiry behavior has been relatively active recently, but the actual increase in transaction volume is relatively limited, and the willingness to accept high priced lithium carbonate is still low.

The market situation of lithium hydroxide is weak and wait-and-see, with some companies lowering their high quotations. With the temporary stability of the upstream industrial grade lithium carbonate market, the price of upstream spodumene concentrate is weak and stable, and the cost support is average. The supply side mainly digests inventory, and the downstream demand for high nickel materials is poor. The pattern of strong supply and weak demand continues, and the lithium hydroxide market is under pressure.

The downstream price of lithium iron phosphate remains weak and downward, and the overall market negotiation atmosphere is lukewarm. Due to insufficient downstream demand, slow shipments, high inventory levels, stable operating rates, and manufacturers operating under pressure, there is a clear pessimistic attitude. Downstream replenishment is mainly based on demand, with main supply contract customers and overcapacity. The lithium battery market has a strong wait-and-see atmosphere.

In terms of futures, the price of lithium carbonate futures in January was basically in a range of fluctuations and consolidation. On January 30th, the opening price of the LC2407 contract for lithium carbonate futures on the Guangzhou Futures Exchange was 101950 yuan/ton, the highest price was 102500 yuan/ton, and the closing price was 101000 yuan/ton, with a daily decline of 0.54%. The trading volume was 54900 lots and the position was 141118 lots.

According to lithium carbonate analysts from Business Society, the market is currently in the early stage of the Spring Festival holiday, with producers and traders mainly offering stable prices. There is a slight willingness to replenish inventory in the downstream market recently, but the acceptance of high priced lithium carbonate is relatively low, so transactions are still relatively low. Short term procurement demand is difficult to see an increase, and it is expected that the price of lithium carbonate will stabilize in the short term.

1、 Price trend

According to the Commodity Market Analysis System of Business Society, as of January 26th, the average price of refrigerant R22 was 21600.00 yuan/ton, which remained unchanged from the beginning of the month and increased by 17.82% compared to the same period last year

According to the Commodity Market Analysis System of Shengyishe, as of January 26th, the average price of refrigerant R134a was 28500.00 yuan/ton, an increase of 3.01% from the beginning of the month at 27666.67 yuan/ton, and an increase of 16.33% compared to the same period last year.

2、 Market analysis

The domestic price of trichloromethane has slightly increased this week, with 4.55% last week. The price of hydrofluoric acid has remained stable, while the price of raw materials has remained relatively strong. At the end of the year, the overall trading volume in the refrigerant market has turned weak, and the domestic R22 market price has continued to remain stable and move forward.

This week, domestic hydrofluoric acid prices remained stable and continued to move forward, with raw material prices remaining stable. In addition, as the end of the year approached, enterprise quotas bottomed out, supporting the continued strong operation of domestic R134a prices.

3、 Future Market Forecast

Business Society refrigerant analysts believe that the overall trading volume of the domestic refrigerant market will turn weak by the end of the year, and the prices of domestic refrigerants R22 and R134a will continue to remain stable in the short term.

According to the Commodity Market Analysis System of Business Society, the market for mixed xylene (1.5-1.26) has recently risen. On January 26th, the benchmark price of mixed xylene was 7390 yuan/ton, an increase of 4.38% from 7080 yuan/ton on January 5th.

International crude oil and mixed xylene prices rise, with mixed xylene receiving some support

Recently (1.5-1.26), international crude oil prices have risen from a low level due to the impact of the Red Sea incident, which has strengthened the cost support for mixed xylene. As of January 26th, WTI03 contract settlement is $77.36 per barrel; Brent 04 contract settlement is $81.96 per barrel. The price increase of mixed xylene in Asia has supported the domestic market, with prices of heterogeneous grade xylene in Asia ranging from $942 to $943 per ton as of January 26th.

Continuous increase in mixed xylene port inventory and increased supply pressure

The continued increase in mixed xylene port inventory has put pressure on the supply side of mixed xylene. It is understood that as of January 26th, the total inventory of xylene in East and South China amounted to 81000 tons, a significant increase from 56000 tons in early January.

Temporary stability of xylene production and necessary support for mixed xylene production

The domestic supply of xylene is relatively normal, with a domestic PX operating rate of over 80%. A 750000 ton unit of Pengzhou Petrochemical has restarted, but some units are still undergoing maintenance. The spot supply is normal. This week, the international crude oil price trend has fluctuated, and the external PX price has not changed much. As of the 26th, the closing price in Asia is 1000-1002 yuan/ton FOB South Korea and 1041-1043 US dollars/ton CFR China. Recently, the operating rate of PX plants in Asia has remained high. Overall, the operating rate of xylene plants in the Asian region is nearly 80%. The supply of PX goods in the Asian region is normal, and the price range of crude oil has fluctuated recently. The domestic xylene market price trend is temporarily stable.

The market for phthalic anhydride saw a slight increase, with stable production and stable demand support for mixed xylene

The operation of domestic phthalic anhydride units is stable, but some units are still in a shutdown state. Currently, the operating rate of phthalic anhydride in China is around 60%. Recently, the price of industrial naphthalene has increased, and the supply of naphthalene based phthalic anhydride has increased. As a result, the price trend of ortho phthalic anhydride has increased.

Small fluctuations in the domestic mixed blending market, weak support for mixed xylene demand

Since the fourth quarter, the domestic mixed blending market has entered a low season, with weak downstream inquiries and weak demand for mixed xylene. As of late January, the operating rate of refinery facilities nationwide was around 7.3%.

Market forecast: In the short term, international crude oil will fluctuate widely, and there is a high risk of changes in the cost of mixed xylene. Domestic port inventories will continue to increase, and the demand for mixed xylene will be weak. In the short term, the mixed xylene market will be mainly affected by the crude oil market, and it is expected that mixed xylene will continue to rise in the future.

Introduction: Urea, also known as urea or carbamide, is an organic compound composed of carbon, nitrogen, oxygen, and hydrogen, and is a white crystal. Urea is a neutral fertilizer that is suitable for various soils and plants. Because it has the advantages of easy preservation, convenient use, and minimal soil damage, it is a widely used chemical nitrogen fertilizer and also the nitrogen fertilizer with the highest nitrogen content.

The upstream production raw materials for urea are coal or natural gas. The intermediate process involves reacting high-purity carbon dioxide and synthetic ammonia to produce urea under certain conditions. The downstream of urea is mainly used for agriculture and industry. Among them, agricultural demand accounts for the main position, accounting for about 70%. Most of it is directly applied as nitrogen fertilizer to crops, grains, fruits and vegetables, and a small portion is synthesized with phosphorus and potassium fertilizers to form compound fertilizers and reused in agriculture. The industrial demand is mainly for urea formaldehyde resin, accounting for about 20%, and urea can also be used for melamine and desulfurization and denitrification in power plants.

The 2023 urea market in Shandong Province experienced a V-shaped fluctuation

According to the Commodity Market Analysis System of Shengyishe, the urea market in 2023 will generally show a V-shaped trend of first falling and then rising. Narrow rise in the first quarter, significant decline in the second quarter, significant increase in the third quarter, and first rise and then fall in the fourth quarter. The highest point of the year was in early March, with an average market price of around 2841.88 yuan/ton. The lowest point of the year was in mid June, with a price of around 2210 yuan/ton. The maximum decline for the year was 22.23%.

From the monthly K-bar chart, it can be seen that urea has experienced more decline than increase throughout the year. The largest decline was in May, a decrease of 8.08%, and the highest increase was in July, an increase of 15.86%.

First quarter: ups and downs. After New Year’s Day, the logistics and transportation situation improved, and agriculture began to prepare fertilizers. Downstream compound fertilizer factories made up their positions at low prices, and the market began to warm up. In early February, daily urea production remained high, but coal prices fell and cost support was insufficient, resulting in a slight decline in urea prices. In late February, as spring plowing approaches and agricultural demand is strong, urea prices usher in a new round of increase. But in mid March, there was a decrease in spring plowing and fertilizer supplementation, while the price of raw coal continued to decline. The downstream compound fertilizer market was average, and downstream demand weakened. Urea showed a characteristic of not being prosperous during the peak season, and urea prices began a downward trend.

Q2: All the way down. In April and May, agricultural demand continued to weaken, entering the off-season of agricultural demand. Urea companies started at a high level, causing serious accumulation of urea stocks. Urea manufacturers significantly lowered their prices, creating a strong bearish market atmosphere. The summer fertilizer production of composite fertilizers was delayed, and the composite fertilizer industry started below expectations. The production of sheet factories continued to be sluggish, coupled with insufficient cost support, multiple negative factors led to a continuous decline in urea prices. In early June, agricultural demand was concentrated and replenished, coupled with the impact of a new round of bidding in India, market sentiment improved, and urea prices surged.

Third quarter: Significant increase. Affected by the sharp drop in urea prices in the second quarter, the social inventory of urea remained low, and planned maintenance and malfunctions led to a decrease in the operating rate of enterprises. But with the outbreak of fertilizer demand in summer, coupled with a significantly higher than expected number of bids in India, the market trading atmosphere is hot, urea supply is in short supply, and urea prices continue to fluctuate and rise, showing a characteristic of not being weak in the off-season.

Fourth quarter: first rising and then falling. In late October, urea prices saw a significant increase again due to the favorable export performance of India and the slow start of winter storage. In the futures market, on November 16th, the main contract price for urea futures was 2383 yuan/ton, an increase of over 40% compared to mid June. In order to bring urea prices back to rationality, maintain normal production and sales profits, and ensure the supply of winter storage and spring plowing fertilizers in 2024, policy efforts have begun. On November 17th, twelve companies including Sinochem Chemical Fertilizer issued a joint initiative to promote the supply and price stability of urea in the market. They will not hoard or pursue price increases, and if necessary, take timely measures to serve the supply and price stability. Once the initiative was launched, the domestic urea market began to fluctuate and decline.

How will the urea market develop in 2024?

From the perspective of production capacity and output: According to data statistics, urea production in China entered a concentrated period in 2023, with a domestic urea production capacity of about 73.81 million tons, an increase of 2.16 million tons compared to 2022. In 2023, the domestic urea production was around 60.16 million tons, an increase of 6.44% compared to 2022. In 2024, there are still plans to increase production capacity in the northwest, central, and eastern regions. It is expected that the production capacity increment of the urea industry will be 4.25 million tons in 2024. However, the production progress of downstream compound fertilizers is slower than that of urea, and the board industry is mainly focused on regional transfer with limited new production capacity. The supply and demand relationship in the domestic urea market will shift from a basic balance of supply and demand to an oversupply, or may shift the price center of the domestic urea market downwards

From the perspective of imports and exports: In terms of urea exports in the past five years, the export volume has been fluctuating. The annual urea export volume in 2023 was 4.25 million tons, an increase of 50.18% compared to 2022. Among them, September had the highest exports, with a monthly export of 1.18 million tons. The country with the highest annual export volume is still India, with an export volume of 1.93 million tons, accounting for 45.49% of the total export volume. The export volume of urea in China may decrease in 2024. Firstly, global urea production capacity continues to expand, and the international urea price center may shift downwards. Secondly, India will have one 1.27 million ton unit put into operation in 2024, which may reduce the import demand for urea in China. The third is the impact of the policy of ensuring supply and stabilizing prices. The “legal inspection” policy is becoming stricter, and the export volume of urea will decrease.

From the perspective of market demand, the estimated total demand for urea in 2024 is around 58 million tons. Agricultural demand has always been the main flow of urea in China. As of the end of 2023, the national grain sowing area was 118969 thousand hectares (1784.53 million mu), an increase of 636 thousand hectares (9.55 million mu) or 0.5% compared to 2022. The cultivated land area is steadily increasing, and the agricultural demand for urea is constantly increasing. Industrial demand may increase slightly. In 2024, the urea demand for melamine, urea formaldehyde resin, and automotive urea showed a stable state, with little or no change. In terms of thermal power shortage, due to policy guidance, urea will be used as a reducing agent to further replace synthetic ammonia in 2024, and it is expected that the demand for urea will further increase.

Looking at the future: urea supply will increase in 2024, demand will be weak, and exports will be tight. It is expected that the price center of the domestic urea market will fluctuate downward in 2024.