An analysis of the reasons for the increase in the price of aluminum fluoride

According to recent reports, aluminum fluoride prices jumped by 11% in November 2012. This sudden rise has sparked curiosity about the underlying reasons behind such a significant price hike within just one month. One contributing factor is the sharp increase in the price of fluorspar powder, which surged by 12% over the past three months. As a key raw material, the rise in the cost of fluorspar directly affected the production expenses of aluminum fluoride, pushing its price upward. Additionally, the National Materials Reserve Bureau’s decision to purchase and store 160,000 tons of primary aluminum has further fueled demand. This move has led to a surge in downstream consumption, creating a ripple effect across the market. Prior to this price hike, aluminum fluoride producers had been struggling financially. The price of aluminum fluoride had plummeted from 11,000 yuan per ton to 6,000 yuan per ton, leaving many manufacturers on the brink of collapse. Faced with these challenges, producers seized the opportunity to adjust their pricing strategies, leading to substantial increases in the cost of aluminum fluoride. However, this adjustment is expected to stabilize relatively soon, though the pace of growth may gradually slow down as supply and demand balance out. Guodu Securities has noted that the chemical industry has recently encountered short-term supply shortages due to equipment maintenance and seasonal weather conditions. With low inventories at various levels of the supply chain, product prices have become highly sensitive to fluctuations in supply. While this has caused a temporary spike in prices, there remains a lack of solid demand support. Consequently, these price increases are largely driven by rising input costs rather than strong market fundamentals. In the short term, it will be challenging for the entire industrial chain to experience synchronized price recoveries, and profitability for companies may not see significant improvement. Investors are encouraged to focus on firms with relatively stable demand, such as Yangon Chemical and Lianhua Science and Technology, which cater to industries less affected by economic cycles. Additionally, companies involved in engineering and contracting, like China Chemicals and Donghua Science and Technology, could benefit from investments in the coal chemical sector. These firms are well-positioned to capitalize on emerging opportunities despite the current volatility in the market.