Aluminum billet destocking accelerated last week, and processing fees in Foshan area continued to rise

Regarding aluminum billet inventory, last week saw an accelerated destocking of aluminum billets. One reason was the continued decline in arrivals; another was the stabilization and recovery in consumption and demand compared to July. According to the latest SMM statistics, as of August 8, domestic aluminum billet social inventory stood at 122,700 mt, down 7,100 mt from August 5 and down 6,700 mt from August 1, with pick-up from warehouses increasing by 2,700 mt to 44,400 mt. In Foshan, inventory decreased by 3,500 mt, with mid-week arrivals down by about 2,000 mt and outflows increasing by about 2,000 mt, signaling a positive trend overall. In Wuxi, inventory decreased by 3,600 mt, also due to low arrivals and slightly increased outflows. Other regions saw no significant changes in inventory. Although current domestic aluminum billet inventory remains at a three-year high for the same period, the YoY increase has narrowed to 43,100 mt. Looking ahead to the trajectory of domestic aluminum billet inventory, entering mid to late August, with the "Golden September" demand slightly picking up and limited supply pressure, domestic aluminum billet inventory is expected to remain stable with a slight decline, likely maintaining around 100,000-150,000 mt throughout August.

Regarding aluminum billet conversion margins, due to changes in supply and demand last week, the performance of aluminum billet conversion margins varied across three regions. As of August 8, the processing fee for φ120 aluminum billets in Foshan was 430 yuan/mt, up 40 yuan/mt WoW, making it the most advantageous among the three regions. In Nanchang, due to replenished supplies, the processing fee for φ120 aluminum billets was adjusted down to 330 yuan/mt, down 70 yuan/mt WoW. In Wuxi, the processing fee slightly decreased by 10 yuan/mt WoW to 340 yuan/mt. SMM expects that, with the support of increased procurement demand as the traditional peak season approaches, aluminum billet conversion margins in various regions will remain stable to strong throughout the month.

At the beginning of August, the domestic aluminium extrusion market remained in the off-season. Although some downstream customers engaged in bargain hunting, the overall purchase volume was small and failed to boost the operating rate last week. The operating rate of the leading domestic aluminium extrusion industry remained stable last week, recording 50.50%. In different segments, the order volume for construction extrusions has recently declined significantly, and even leading enterprises can only maintain the operating rate at off-season levels. Additionally, the recently introduced favourable macro policies have yet to show significant effects, and SMM will continue to monitor their impact. In the industrial extrusion segment, the production schedule for PV modules has not shown a significant increase, while the downstream purchase volume for automotive extrusions has increased, with enterprises producing according to demand. Overall, in the context of the off-season, the market is difficult to achieve significant growth, and it is expected to operate stably in the short term.