Domestic Aluminum Ingot Destocking Over the Weekend: Has the Turning Point Been Basically Confirmed? [SMM Analysis]

By mid-March, as the traditional peak season of "Golden March and Silver April" gradually takes effect, the supply-demand pattern of spot aluminum in the industry chain continues to improve. Upstream production site inventory had accelerated destocking earlier, and recently, in-transit cargo volumes contracted MoM. Coupled with the sustained strong outflows from warehouses of aluminum ingots and billets on a weekly basis, the supply and demand pressure for domestic spot aluminum has eased, inventory performance has significantly improved, and there were initial signs of destocking in domestic aluminum inventory mid-week last week. Recently, aluminum prices have also been attempting to break through the 21,000 mt threshold.

According to Shanghai Metals Market (SMM), as of March 10, 2025, the total social inventory of domestic aluminum ingots and billets plummeted by 29,000 mt to 1.171 million mt. On a YoY basis, the degree of destocking in the fifth week after the holiday was second only to the same period in 2021. After the weekend, both aluminum ingots and billets experienced destocking, laying a solid foundation for domestic aluminum inventory to enter a continuous destocking phase. The total aluminum inventory of 1.2 million mt at the beginning of March is likely to become the annual peak and a turning point for inventory levels.

In terms of aluminum ingot inventory, entering mid-March, the traditional peak season of "Golden March and Silver April" has boosted downstream operating rates to rebound steadily, with outflows from warehouses continuing to strengthen. Over the past week, outflows from warehouses in major domestic consumption regions reached 1.275 million mt, down 800 mt WoW, remaining stable at post-holiday highs. Coupled with the continuous consumption of upstream production site inventory, in-transit cargoes and weekend arrivals also saw a significant decline. Supply and demand pressure eased simultaneously, and domestic aluminum ingot inventory showed a marked improvement. Since late February, inventory buildup has slowed significantly. Notably, after the weekend, while regions such as Foshan, Chongqing, and Shanghai remained stable, mainstream consumption areas like Wuxi and Gongyi experienced continuous destocking. Among them, Gongyi saw a decrease of 6,000 mt, becoming the main driver of domestic destocking. According to feedback from local warehouses, recent outflows have increased significantly, with concentrated downstream pick-up of goods, especially since last Thursday, when outflows suddenly surged. Downstream feedback indicates improved orders, and outflows are expected to continue improving in March, with inventory continuing to decline.

According to SMM data, as of March 10, 2025, the social inventory of aluminum ingots in China was 868,000 mt, with available inventory at 742,000 mt, down 3,000 mt from last Thursday and 18,000 mt WoW from last Monday. After regions such as east China and Gongyi successively reached destocking turning points, the domestic aluminum ingot destocking turning point initially appeared last Thursday, more than a week earlier than expected. Following the weekend, domestic aluminum ingots saw further destocking, making the turning point more evident. SMM believes that the domestic aluminum ingot destocking turning point occurred in the fifth week after the holiday (earlier than the previously expected sixth week), with the annual peak temporarily appearing at 886,000 mt (lower than the previously expected 900,000-950,000 mt). This is expected to support a steady strengthening of both futures and spot performance in March. Moving forward, close monitoring is needed on the intensity of resumption of work, the release of in-transit cargoes, and the fulfillment of end-user orders, along with secondary verification using aluminum smelter production site inventory data, to adjust the confirmation timing and peak level of the inventory turning point.

Regarding aluminum billet inventory, according to the latest data from SMM, as of March 10, 2025, domestic social inventory of aluminum billets stood at 303,400 mt, down 700 mt WoW from last Thursday and significantly down 10,800 mt WoW from last Monday. After the first post-holiday destocking at the end of February, domestic aluminum billet inventory showed slight fluctuations. However, after further verification over the past one to two weeks, the post-holiday destocking turning point for aluminum billets has been fully confirmed, leaving little doubt that short-term inventory will break below the 300,000 mt threshold. Notably, the recovery in operating rates of downstream extrusion plants after the Lantern Festival has driven a rebound in outflows from warehouses. The past week's outflows of 61,100 mt (up 5,000 mt WoW) have repeatedly set new highs for the year. Even with the disruption caused by loosened aluminum billet processing fees stimulating spot circulation, the logic of marginally enhanced restocking momentum at the end-user level has been validated. As the traditional peak season of "Golden March and Silver April" progresses, coupled with the steady rise in downstream operating rates, market focus has shifted to the pace of order growth realization during the peak season and its role in driving the destocking phase.

On the demand side for aluminum billets, the domestic aluminum extrusion industry's operating rate increased by 2 percentage points WoW to 54.5% over the past week. The industrial extrusion sector maintained high prosperity, with leading enterprises' operating rates consistently at a high level of 80%. Although overall order saturation remains high, it is worth noting that its downstream applications are relatively dispersed. While the 3C sector currently shows promising growth prospects, the industry's characteristics result in relatively transparent profit margins. In the construction materials segment, top-tier enterprises are dynamically adjusting their product structures to address market pressure: on one hand, focusing on securing shares in public construction projects and strengthening cooperation with central and state-owned enterprises to mitigate risks; on the other hand, proactively optimizing the proportion of engineering and home decoration businesses, increasing the share of high-margin home decoration businesses to alleviate operational pressure. Notably, companies with diversified product portfolios demonstrate stronger risk resistance. By leveraging a combination of construction materials, industrial extrusions, deep processing, and aerospace materials, they effectively distribute overall operational pressure. The primary challenges currently facing the industry include prolonged inventory destocking cycles caused by low funding availability for engineering projects and intensified market competition due to insufficient new project starts. Future market developments will require close attention to inventory cycle turning points, the pace of end-use demand recovery, and marginal changes in regional industrial policies. SMM will continue to monitor industry dynamics.