SHANGHAI, May 19 (SMM) –Aluminum stocks in China’s five major markets plunged 39% from this year’s peak to 570,000 tonnes as of May 13. Aluminum prices, however, got no boost and lost nearly 5% in just two weeks.
What was behind the unexpected price decline? Will the light metal search for even lower floor?
Aluminum stocks in China’s five major markets dropped just 20,000 tonnes in the first week of May, much slower than previous weeks. This left market worried that a turning point in aluminum inventories might be in sight, thus dragging aluminum prices down.
In addition, ferrous metals prices in domestic futures market took a heavy battering after Chinese regulators introduced measures to cool fever. Pessimistic remarks that Chinese economy will struggle in the “L” shape for a long time, sparking concerns over demand in the world’s second largest economy.
These are two negative external factors for recent rout in aluminum prices, SMM explained.
Anyway, SMM understands that aluminum prices will get strong support from low stocks.
Limited output release from restarted and new aluminum capacity, as well as stable downstream consumption will allow destocking in aluminum market to continue. SMM sees inventory bottom at 400,000-450,000 tonnes sometime around mid-to-late June. Aluminum stocks will not grow immediately after reaching the bottom and instead will stay at low levels for some time.
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