Low Aluminium Ingot Inventories in China and Overseas Could Potentially Trigger Short Squeeze

SHANGHAI, May 22 (SMM) - Aluminium production in Guizhou province increased slightly. One smelter in Shandong province will shut down 50,000-100,000 mt of capacity in the near future for capacity replacement. The domestic aluminium output may see limited increase in May. With the rainy season approaching, some aluminium capacity in Yunnan province is expected to resume by the end of June. Operating rates in aluminium downstream sectors dropped slightly last week. Aluminium plate/sheet, strip and foil producers were plagued by poor orders and inventory backlogs. Construction aluminium extrusion sector still performed poorly. Aluminium ingot social inventories continued to fall, driven by dip buying and relatively low ingot output, while billet inventories grew due to high output and slack downstream demand. Low aluminium ingot inventories boosted spot premiums, while growing billet inventories inhibited the rebound of conversion margins. Overseas aluminium ingot inventories are also at a low level, thus a short squeeze is likely to occur.