Aluminium outflows from warehouses weakened due to downstream CNY holidays, causing inventory to grow

On Feb 1, 2024, SMM data showed that the social inventory of aluminium ingots in China’s eight major markets was 472,000 mt (the amount for sale at 346,000 mt), up 35,000 mt WoW, and up 5,000 mt compared with Jan 29, which was still a 7-year low. The outflows of warehouses of aluminium ingots was 104,400 mt in the week (Jan 22-Jan 28), down 12,900 mt WoW, reflecting the sharp drop in aluminium ingots demand due to the CNY holiday in the downstream. The inventory is still the lowest compared with the same period in past six years, but inventory growth tends to accelerate in the future. We need to pay close attention to the inventory accumulation before and after CNY. Since the end of January, there has been massive inventory accumulation, pressuring recent aluminium prices. As CNY holiday is drawing near, the amount of aluminium ingot casting will increase slightly in northwest and southwest China. According to preliminary estimates by SMM, the current domestic aluminium ingot production is 35,000 mt/day, which may reach 40,000 mt/day during CNY holidays, but the amount of aluminium ingot still reported a year-on-year decline. The total inventory in 2024 CNY holiday may be difficult to exceed level in the same period of 2023. Domestic aluminium ingot stocks will accumulate before and after the CNY. The total social inventory of domestic aluminium ingots on the last day before CNY may reach 550,000-600,000 mt, and about 750,000-800,000 mt on the first day after CNY, and the peak of inventory after CNY may be around 900,000-950,000 mt.