SMM Weekly Updates On China Aluminium Ingot And Billet Social Inventories As Of June 29

SHANGHAI, Jun 29 (SMM) – Aluminium ingot: Aluminium ingot social inventories across China’s eight major markets stood at 522,000 mt as of June 29, up 4,000 mt from June 21 (the last trading day before the Dragon Boat Festival), but down  5,000 mt from June 25 and also 212,000 mt lower than the same period last year. The stocks are still the lowest compared with the same period of past five years.
SHFE aluminium fluctuated around 18,000 yuan/mt this week. Cargo arrivals increased only slightly, while cargo withdrawals from social warehouses picked up a little. Cargoes flooded into south China after local spot premiums hit a three-year high.
Except for obvious inventory decline in Gongyi, inventories in the rest of major markets either held stable or increased slightly.

South China: Tight supply in the spot market sustained spot premiums for nearly half of month. However, some cargoes from Guangxi and Hebei arrived in south China on June 29, somehow easing supply crunch.

Wuxi: Cargoes arrivals rose considerably, while cargo withdrawals from warehouses failed to keep up, causing stocks to pile up slightly.

Gongyi: Local premiums declined due to abundant stocks, causing its price gap with south China to widen significantly. This drove cargo owners to ship aluminium ingots to south China for arbitrage, resulting in obvious inventory reduction in Gongyi. 

With production restarts in Yunnan and inflows of cargoes from Xinjiang, south-west and north China, aluminium ingot social inventories are at risk of growing. China’s aluminium production is estimated to grow further in June, making it almost unlikely for aluminium ingot social inventories to drop below 500,000 mt in the short term. SMM expects aluminium ingot social inventories to stabilise in late June or early July before building up slightly after more cargoes arrive.

Aluminium billet: According to SMM statistics, the domestic aluminium billet social inventory stood at 146,300 mt as of June 29, a decrease of 10,300 mt from June 25, but up 8,200 mt from June 21 (the last trading day before the Dragon Boat Festival). The stocks are still at a high level compared to the same period in the past three years. Billet plants reduced shipments to the market amid extremely low conversion margins. Transactions were muted, even after conversion margins have fallen to extremely low levels. Mounting inventories held by billet plants can not be ignored.