Aluminum Billet Inventory Continued to Decline Due to Sharp Reduction in Warehousing; Processing Fees Fell Back into Negative Territory Amid Oversupply [SMM Aluminum Billet Weekly Review]

SMM April 17 update:

According to SMM statistics, on April 16, aluminum billet inventory across major consumption regions in China totaled 292,000 mt, down 19,500 mt WoW from last Thursday. Regarding warehouse withdrawals, aluminum billet warehouse withdrawals totaled 54,000 mt last week, up 500 mt WoW, basically flat. During the week, downstream buying sentiment remained cautious, dominated by rigid demand, and market trading volume struggled to expand. Meanwhile, due to the persistent surplus of aluminum billets, processing fees were under severe pressure, prompting producers to proactively reduce billet casting volumes. Combined with social inventory prioritizing aluminum ingot warehouse inflows, aluminum billet warehouse inflows decreased significantly, and social inventory maintained a steady downward trend. As the supply side tightens and inventory arrivals decrease, aluminum billet inventory will continue its destocking pace, and month-end aluminum billet inventory is expected to pull back to 250,000 mt by the end of April.

As macro sentiment recovered, compounded by disturbances in fundamental expectations, SHFE aluminum rose above 25,000 yuan/mt again during the week. However, aluminum billet sellers and buyers have not entered a virtuous cycle. Due to the persistent oversupply on the supply side, aluminum billet processing fees once again entered a "negative processing fee" phase, and trading sentiment hit rock bottom. By region, Foshan processing fees were quoted at -40/10 yuan/mt, down 200 yuan/mt WoW; Wuxi was quoted at -50/80 yuan/mt, down 250/270 yuan/mt WoW; Nanchang was quoted at -150/-100 yuan/mt, down 330 yuan/mt WoW. Currently, spot order market processing fees performed weakly. To reduce the risk of price fluctuations, buyers preferred to purchase at weekly or monthly average prices, but transactions remained sluggish. Given the unchanged oversupply pattern of aluminum billets, processing fees will remain under pressure, mainly following aluminum price fluctuations. Going forward, close attention should be paid to downstream buying sentiment and the impact of futures fluctuations.