Aluminum ingot inventory built-up showed signs of accelerating, surpassing 800,000 mt this week

As of August 1, 2024, SMM reported a total social inventory of aluminum ingots at 814,000 mt, (the amount for sale stood at 688,000 mt), an increase of 24,000 mt WoW and 289,000 mt higher YoY. This week, spot aluminum prices fell below 19,000 yuan/mt and showed signs of a slight rebound. However, fundamentally, aluminum still faces a scenario of increasing supply together with weak demand. Downstream sentiment towards purchasing aluminum ingots remains cautious, and this week's pick-up from warehouses showed no significant improvement. Major domestic consumption areas experienced a significant inventory build-up. Overall, since H2, ingot production from provinces like Yunnan, Xinjiang, Inner Mongolia, and Qinghai has been higher YoY, keeping the supply side loose. The weak trend in aluminum prices has not significantly stimulated downstream demand. Early August saw no optimistic signs in domestic aluminum ingot pick-up from warehouses and destocking. The inflow of bonded zone inventory in August has become a new risk for aluminum ingot inventory, exacerbating the high domestic inventory levels, potentially further suppressing futures and spot aluminum performance. SMM expects that the overall decline in domestic aluminum ingot inventory in August will remain limited, with the short-term trend of inventory build-up difficult to change, fluctuating between 780,000-850,000 mt in the first half of August.