1. Supply of alumina. Alumina accounts for 28-34 per cent of the cost of aluminum production. The international aluminum market is highly concentrated and most alumina is sold through long-term contracts, so there is little spot market for alumina. In China, for example, before 1997, there were no long-term contracts and alumina was mainly purchased from the international spot market.
In recent years, the scale of the electrolytic aluminum industry has been expanding and the demand for alumina has been increasing. Currently, about two-thirds of alumina needs to be purchased from the spot market. China's massive purchase of alumina in the international market has directly led to a sharp rise in alumina prices.
According to statistics, China imported a total of 5.87 million tons of alumina in 2004, a year-on-year increase of 4.8%. The average import price was US$340, but the cost was less than US$120. By simple calculation, China's profit to foreign alumina suppliers in 2004 exceeded RMB 1 billion. The rise in alumina prices led to an increase in production costs in the aluminum industry, and some enterprises faced economic losses.
2. Impact of demand and supply. Supply and demand have a direct impact on the market. When supply and demand are in balance, the price of a commodity may remain at a relatively stable level, but when there is an imbalance between supply and demand, the price of a commodity can experience severe volatility.
In the aluminum market, investors can focus on an indicator that represents supply and demand, and it is aluminum inventories. Aluminum inventories are divided into two categories: stocks and non-stocks. Inventories, also known as apparent inventories, are a periodic figure at spot market fairs that indicates the amount of aluminum in stock. Non-inventories are the total amount of aluminum owned globally by wholesalers, traders and consumers. These data are not counted and published by professional organizations and are therefore also known as "invisible stocks".
3. Impact of electricity prices. The aluminum industry requires a large amount of electricity. At present, the average power consumption of tons of aluminum at home and abroad has been kept below 15,000 kwh/t. Western experience shows that when the electricity cost accounts for 30% of the total cost of aluminum, it will be regarded as dangerous production.
4. Impact of the economic situation. Aluminum has become an important non-ferrous metal, especially in developed countries and regions, where its consumption is highly correlated with economic development. When the economy of a certain country or region develops rapidly, the consumption of aluminum will also increase. Similarly, when the economy is in recession, the consumption of aluminum decreases, causing fluctuations in the price of aluminum.
In addition, fluctuations in the prices of certain metals related to aluminum and changes in industrial policies in various countries also affect the price of aluminum.
5. Impact of import and export tariffs and international exchange rates. Aluminum in international trade is generally priced and settled using the U.S. dollar, and the trend of the U.S. dollar has a significant impact on aluminum prices. Aluminum tariffs have a particularly pronounced impact on China.
6. Impact of improved technology. The application of computer technology in the aluminum electrolysis industry has established relevant mathematical models and studied the physical fields in its processes. These have led to the rationalization of the design of electrolytic cells and to an increase in their production capacity.
