At present, the supply side reforms aluminum market is still faced with uncertainty, the actual production volume is far not reached the theoretical output, huge inventory and short-term liquidity tightening still bring pressure to the aluminum market. Recently, President Zhou Xiaochuan suddenly put forward "Soft Constraints", which should arouse our attention to the trend of policy-making reform.

The Federal Reserve raised interest rates in June for the second time this year. The U.S. economy continued to grow and the job market performed strongly. Although wage growth remained unsatisfactory and inflation slipped in May, Fed officials seemed inclined to stick to their plans. The Federal Reserve also announced that it would reduce its holdings of bonds and other securities starting this year. In fact, the Fed's contraction will directly reduce the flow of dollars in the market, compared with interest rate hikes. If we reduce the base currency by 2.5 trillion US dollars in a few years, combined with the multiplier effect, this "dollar reduction" will undoubtedly cause great turbulence in financial markets. We tend to think that the Federal Reserve does not place much emphasis on the performance of economic data on the issue of contraction. Even if future economic data weakness postpones further interest rate increases, the Federal Reserve may continue to shrink. In short, the United States is saying goodbye to easing completely. In addition, the central banks of Europe and Japan have spread the news that easing may end one after another. If the central banks of Europe and Japan gradually recover liquidity, it will also have a significant impact on global financial markets. Given that the Fed's specific plan is ahead of market expectations, it deserves special attention whether the Fed will begin to reduce its balance sheet at its policy meeting in September this year.

According to the latest data released by the People's Bank of China, China's M2 grew by 9.6% year-on-year in May. This is the first time that M2 growth has fallen below the historic 10% Mark since statistics were made in 1986. The slowdown in M2 growth is largely a reflection of the financial system's lower internal leverage, which is undoubtedly tighter than past double-digit growth. China's monetary policy will remain stable, moderately tight in the next two years under the pressure of the Federal Reserve's tightening monetary policy. This is bad for China's real estate and stock market. However, real estate transactions have been basically frozen. We think that the central bank deleveraging is to make the money in the market less and more expensive, to control the flow of funds to places where the risk is too high, and to prevent systemic risk. Despite a series of strong policies by management, it shows that the responsibilities of decision-makers exceed market expectations. But many pessimists in the market still suspect that even if policymakers want to make these changes, the liquidation of surplus industries will be more difficult in the face of the current tight market currency, the obstruction of too many interest groups and the rising capacity and output. At present, both China and the United States hope to avoid a sharp appreciation of the dollar against the RMB, which constitutes the basis for coordination and cooperation of exchange rate policies between the two sides. For a long time, the basic system of our country is not perfect, especially the stock market only serves for financing, and failing to put the interests of the majority of investors in the first place is the biggest failure. In the autumn of this year, the Nineteenth National Congress on China's future political and economic trends, reform and compromise, will be an important historical turning point in China's politics and economy. We have no doubt that before the Nineteenth National Congress, all "stable words" were in the forefront. It is the core task of the government to guard against systemic risks in finance and debt. Especially, China's capital should be strictly controlled and controlled, appreciated externally and devalued internally. This has enabled domestic inflation to support basic metals. In the off-season of consumption in the third quarter, the oscillation probability of the basic metal interval is still large.

At present, the domestic alumina spot market transactions are light, and the stock of alumina enterprises and electrolytic aluminium raw materials are at a low level. From the trading situation, most of the contracts are long-term contracts. The overall cost of alumina is about 2320 yuan/ton. Affected by the high start-up rate of electrolytic aluminium and the rebound of alumina price, the alumina production in May was 5745,000 tons, which maintained at a high level. However, due to environmental factors and the expected reduction of production of electrolytic aluminium, the price of alumina has always been suppressed in this respect, and the space above will also be limited. At present, the price of alumina is in the range of 2500-2700 yuan/ton, and the mainstream transaction price is about 2620 yuan/ton. We believe that with the passage of time, especially with the approaching of the 19th National Congress, environmental protection and reduction of production of electrolytic aluminium are expected to increase, domestic alumina prices will be impacted by these negative aspects, and the upward selling pressure of prices will gradually increase. In short, we are still cautious about the short and medium term trend of alumina. It is expected that domestic alumina prices will fluctuate weakly in July.

At present, the supply-side reform of the aluminium market is still facing uncertainty. The actual output reduction is far from the scale of theoretical output reduction. Short-term huge inventory and liquidity tightening still bring pressure to the aluminium market. Recently, President Ogawa suddenly put forward "soft constraints", which should arouse our attention to the trend of reform at the decision-making level. This shows that the management of local governments and enterprises with high debt risk, debt activities may drag down the central government's financial vigilance. This also highlights the central government's firm confidence in reform beliefs after the 19th National Congress, and may imply that we should have a new understanding of de-productivity and de-leverage. We believe that the domestic aluminium market is the policy market in the final analysis. Weiqiao's reduction of 250,000 tons will not be the end, perhaps just the beginning. Baichuan data show that the cost of domestic electrolytic aluminium is about 13200 yuan per ton, and the monthly output is 3.1824 million tons. Production has repeatedly reached record highs, indicating that the local and central game is still in progress. The third quarter will be the announcement period of illegal production capacity in all regions, and the market will be more concerned. At the same time, the announcement and execution of illegal production capacity in Xinjiang will still puzzle the market. In the long run, there is no shortcut to reform. It is risky to try to help enterprises reduce leverage by leveraging residents. Only through structural SOE reform is the main way to solve the problem. Recent partial reduction in alumina production has pushed up the production cost of primary aluminium. In order to take care of the haze, China has asked 28 cities to cut aluminium production during the winter heating period, which accounts for more than 55% of the world's total aluminium production. Environmental pressure and the expectation that some electrolytic aluminium production will be reduced will weaken the empty side's throwing pressure. According to the actual market situation, the domestic aluminum inventory rebounded slightly in the off-season, especially the number of large trucks on the highway showed a significant increase, which may indicate that consumption and intensity exceeded people's expectations. We believe that, with the approaching of the Nineteenth Congress, it is the core task of the government to take precautions against systemic risks in finance and debt. Under the interaction of capacity removal, environmental protection pressure and rising domestic real inflation expectations, as well as corresponding real estate tightening cycle and liquidity tightening (bad), the domestic aluminum market will continue to show an interval oscillation trend. From China Nonferrous Metal Network