On February 26, 2024, SMM data showed that the total social inventory of aluminum ingots was 748,000 mt, (the amount for sale was 622,000 mt), 42,000 mt higher than last Thursday and 257,000 mt higher than pre-holiday. The inventory growth remains stable and controllable, staying at the lowest level in the same period in the past seven years. From a year-on-year perspective, the current inventory of aluminum ingots has dropped by 395,000 mt compared with the same period in the second week after the holiday last year, and the inventory growth dropped by 142,000 mt. The cumulative inventory growth this weekend was 8.6%, compared with 12.9% in the same period last year. In terms of outflows from warehouses, the outflow of aluminum ingots from warehouses in the first week after the holiday was 81,100 mt, which was still a decrease of 4,400 mt from the last week before the holiday.
SMM believes that although domestic aluminum ingots are facing certain inventory pressure after the holiday, the supply of goods is slightly looser. At the same time, due to the recent opening of the import window, spot prices are facing heavy pressure, and the recent spot premiums and discounts have been under pressure. However, after Feb 24, as downstream companies completely resumed work, the outflow from warehouses is expected to return to normal levels in the short term. SMM predicts that low inventory and weak inventory growth will continue to provide certain support for the overall performance of aluminum prices after the holiday.
In terms of regions, the accumulated inventory in the three places over the weekend was more than 10,000 mt, and the accumulated inventory in Wuxi was 15,000 mt. The arrival of goods remained strong, and the outflow from warehouses also rebounded significantly. The spot in east China were at a small premium after the holiday. The Gongyi area has accumulated 14,000 mt of inventory. Although the inventory pressure is still relatively high, as the outflow from warehouses ranked first among the three places last week, the relatively stable performance provides certain support for spot premiums and discounts in central China. South China has an accumulated inventory of 10,000 mt. According to SMM research, Guangzhou Bureau's current cargo volume in transit is normal, mainly cargo from the southwest. Due to the recent high cost of truck transportation, some of the original cargo slated by truck has been forwarded to the railway, resulting in weekend arrivals. At the same time, the weak aluminum prices and premiums and discounts are conducive to post-holiday replenishment. Last week's shipments also rebounded to a certain extent. Although the spot premium in south China has narrowed for four consecutive days, it still maintains a small premium.
In terms of the domestic aluminum billets inventory in the second week after the holiday. According to SMM statistics, the domestic social inventory of aluminum billets on February 26 was 276,400 mt, which was only 700 mt higher than last Thursday and 78,400 mt higher pre-holiday. Following the inventory growth of aluminum billets last Thursday, the inventory growth this weekend is undoubtedly a shot in the arm for the aluminum rod market. In terms of outflows from warehouses, according to SMM statistics, the outflow of aluminum billets from warehouses in the first week after the holiday was 38,400 mt, a significant increase of 24,300 mt from the last week before the holiday. According to SMM analysis, with downstream work resumption, downstream companies seem to prefer the direct purchase of aluminum billets with relatively low absolute prices for replenishment. The inventory and outflow from warehouses of aluminum billets is significantly better than that of aluminum ingots.
Looking back on the same period after the Spring Festival in the past six years, except for this year, in more than half of the years, the aluminum billets inventory has reached an inflection point in the second week after the holiday. We expect this year’s destocking inflection point to appear as soon as possible, but after the holiday, the aluminum billets inventory at smelters remained high and weather factors affected post-holiday shipments, in order to successfully reach the inflection point, we need to further improve the performance of downstream outflow from warehouses after Feb 24 and pay close attention to the recovery of downstream consumption.
Looking back at the inventory before and after the Spring Festival in previous years, it may take 5-6 weeks for aluminum ingot inventory to reach an inflection point after the holiday, but the inventory growth will slow down after 3-4 weeks after the holiday. The inventory inflection point of aluminum billets appeared 2-3 weeks earlier than that of aluminum ingots. However, SMM believes that some time ago, there was a backlog of about 20,000 mt of aluminum ingots at stations in Xinjiang. The interference of weather conditions on the arrivals is difficult to ignore, and currently domestic aluminum and aluminum billets companies still have a certain amount of inventory at smelters, deserving attention. At the same time, against the backdrop of high aluminum billets inventories at smelters and a year-on-year decline of inventory after this year’s holiday, whether the turning point for destocking can occur earlier still depends on the complete resumption of work downstream after Feb 24 and the recovery of consumption after the holiday. SMM predicts that from the end of February to mid-March, domestic aluminum ingot and aluminum billets inventories will still maintain a weak inventory growth. The peak of aluminum ingot inventory after the holiday may reach around 850,000 mt. The inflection point of aluminum billets inventory is expected to appear in early March. It is necessary to pay close attention to the recent shipment of aluminum products and the recovery of domestic consumption after the holidays.
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