Aluminum May Outperform Other Industrial Metals IN 2022

Aluminum Likely TO Outperform Other Industrial Metals This Year

Enterprises need to do a good job in risk management

It is understood that the current pricing mechanism of the industrial chain of the aluminum industry is gradually market-based pricing from upstream to downstream: the upstream is based on the annual long-term agreement price and the monthly average price, and the downstream is based on the market price and bidding price. Companies that use aluminum as raw materials are all affected, including Aluminum Enclosure company, aluminum extrusion profile, die-casting mode company.

"Because midstream companies mainly aim to earn processing fees and basically conduct futures price points, they are less affected by aluminum price fluctuations," the analyst said; The "roller coaster" of aluminum prices has a greater impact on terminal enterprises. "Because it is difficult to transmit prices to the consumption link, end-production enterprises are exposed to the risk of large price fluctuations."

And there is another important reason, with the continuous rise of the industry in the field of electronic products, many electronic products using aluminum alloy Enclosure have gradually emerged. Many businesses will buy Electronic Instrument Case for PCB. They would like to choose Aluminum Instrument Case for protecting electronic component. For example 19inch server case manufacturer will select 19" Rack Mount Enclosure.

The Impact ON Company

When aluminum prices surged sharply in September and October, downstream demand weakened significantly, and some companies could wait for aluminum prices to fall and re-purchase to make up for production orders.

However, for some terminal enterprises that have strict time limit requirements for delivery, they may be forced to suffer losses or default. "The analyst said

How The Company Responds？

It is understood that the market concentration of my country's aluminum processing industry is relatively low, and the annual output of aluminum processing products of the top six enterprises in production capacity in 2020 will not exceed 5% of the country's total output.

Analysts said that the proportion of large-scale processing enterprises in China is relatively small, resulting in weak bargaining power of enterprises. In general, aluminum processing enterprises are passive recipients of prices, which further strengthens the necessity of timely hedging for aluminum processing enterprises.

"Affected by the rapid rise in aluminum prices in the first three quarters of this year, most small and medium-sized enterprises experienced a decline in profits or even losses. As aluminum prices fell sharply and stabilized in the fourth quarter, the overall profitability of aluminum processing enterprises has improved," analyst analysis;

Affected by factors such as the epidemic and global monetary policy, aluminum prices are still facing the risk of sharp fluctuations in the market outlook. It is recommended that downstream enterprises conduct hedging in the futures and options markets in a timely manner. This will be an effective means to ensure the stable operation of enterprises.

Conclusion:

Due to the current fall in aluminum prices, the raw materials purchased at high prices in the early stage of processing enterprises will face the risk of depreciation. If they cannot be effectively hedged, they will also dilute their own profit levels.

For enterprises, they can follow the trend in the trend market, and conduct appropriate risk hedging through futures according to their own risk points in the volatile market.

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