Internationally, at present, multiple factors have led to the shortage of electricity supply in Europe. The power structure in Europe is mainly composed of natural gas, nuclear energy and renewable energy. Affected by the geopolitical situation, the supply of natural gas continues to decline and the price rises, which has caused huge pressure on European energy costs. The recent high temperature weather has led to increased evaporation of water in European rivers (lakes), lower water levels, and serious impacts on hydropower generation.  The impact of high temperature on the power structure in Europe is comprehensive, which has also led to a record high electricity price in Europe, and smelters with high energy consumption will continue to face the threat of production shutdown.

From the actual situation, the probability of a comprehensive production reduction in Europe is relatively low. Since September last year, the shortage of natural gas in Europe has led to a sharp increase in energy, and the production of electrolytic aluminum has been reduced. Up to now, the production of electrolytic aluminum in Europe has decreased by about 858,000 tons, accounting for about 20%. Under the extreme high temperature weather this year, there are mainly four regions of Slovakia, France, Germany and Greece that have reduced production, while Norway, Sweden and Iceland have low electricity costs and sufficient power supply, and the probability of production reduction is low. Therefore, it is optimistic that the production capacity of electrolytic aluminum in Europe will be reduced by 670,000 tons this year. If the high temperature continues until September, the scale of production reduction may be further expanded. From a pessimistic perspective, the production capacity reduction of electrolytic aluminum will exceed 800,000 tons.

From the perspective of global supply, the reduction of electrolytic aluminum production in Europe will not have a particularly large impact on global supply, but it will have an impact on local spot premiums and discounts in Europe. Aluminum inventories remain depleted. If September is still affected by the high temperature, the reduction of electrolytic aluminum production will be further expanded, which may lead to a further increase in the premiums and discounts in major European consuming regions. At present, against the backdrop of low LME aluminium inventories, there may be a danger of short positions.

After the off-season of consumption, considering that the pace of resumption of production on the supply side will be slower than that on the demand side, or there may be a phased destocking situation, which will bring about a short-term mismatch between supply and demand, especially in the Sichuan-Chongqing region, the spot premium and discount will be significantly higher. After the "Golden Nine Silver Ten" consumption peak season ends, the supply pressure will re-emphasize. With the advent of winter, the problem of energy shortage in Europe will become more severe, and aluminum prices may usher in a fundamental resonance at home and abroad, with a small rebound peak. At the same time, the Fed's subsequent interest rate hikes will also bring some restraint to foreign demand, and may enter a downward range again.