Domestic aluminum ingot inventories are approaching last year's low

On January 22, 2024, SMM data showed that the social inventory of aluminum ingots in China’s eight major markets was 440,000 mt, and the amount available for sale stood at 314,000 mt, down by 1,000 mt WoW and 304,000 mt YoY. It has been destocked for two consecutive weeks. The figure was still the lowest compared with the same period of past seven years. The outflows of aluminum ingots last week was 117,300 mt, and the weekly outflows increased by 2,400 mt WoW. The relatively strong outflows in the past half month has continued. Aluminum prices have fallen below 19,000 yuan/mt. The lower base price continues to stimulate the market's willingness to replenish stocks before the holidays. There is still no significant increase in overall arrivals over the weekend. In late January, the destocking of domestic aluminum ingots is still continuing. At present, the overall domestic spot circulation continues to tighten, and the inventory will be mild, supporting the premiums in the three major cities. Among them, aluminum ingot inventories in Foshan and Wuxi fell by 4,000 mt and 1,000 mt respectively WoW, while arrivals in Gongyi were partially replenished. Affected by weather, the outflows weakened slightly, and the inventory increased by 6,000 mt.

In contrast, the aluminum billets inventory was impacted by the upcoming CNY break in downstream. The domestic social inventory of aluminum billets on January 23 was 99,600 mt. Compared with last Thursday, the inventory growth was 15,800 mt. The accumulation of aluminum billets was obvious over the weekend, making the domestic aluminum billets inventory reached a four-year low. At present, it has been seriously threatened, and the current inventory gap compared with the same period last year has narrowed to 32,300 mt. Last week, the domestic aluminum billets outflow was 31,100 mt, and the weekly outflow dropped significantly by 13,500 mt. The outflow was affected by the CNY holidays among aluminium extruders in late January. The Foshan area has an accumulated inventory of 6,000 mt, and the arrival volume on weekend was up by 5,800 mt, while the outflow dropped by nearly 10,000 mt last week; the Wuxi area has an accumulated inventory of 4,800 mt, and the outflows dropped by 1,100 mt last week; Changzhou, Huzhou, and Nanchang areas also saw varying degrees of accumulation. The destocking accelerated at the end of 2023. Domestic aluminum ingot inventory has hit new lows for two consecutive weeks before New Year's Day, and the actual inventory for sale is only about 300,000 mt. Heading into 2024, SMM expects aluminium inventory may build up in January: in the first half of the month, due to the continued closure of the import window and the impact of continued production reduction in Yunnan on the arrival of aluminum ingots, the inventory accumulation will be mild. We need to pay attention to the recent opening of the import window, as well as the increase in supply in northern regions such as Xinjiang; in the second half of the month, we need to pay attention to downstream holidays before CNY. Curbed by decline in downstream operating rates before CNY and the decline in the aluminium liquid ratio at the supply, domestic aluminium ingot inventories may once again increase. However, in the past two weeks, due to intensive pre-holiday stocking, the market's consumption of inventory exceeded previous expectations. Therefore, SMM has lowered its pre-holiday inventory forecast. We estimate that the aluminium ingot social inventories across China’s eight major markets may rise to 500,000-550,000 mt by the end of January.