SMM Summit 2016: China Aluminum Stocks to Rebound Rapidly in 2017 from Record Lows in 2016

Published: Nov 16, 2016 10:01

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China’s aluminum market started a round of destocking in 2016 amid the country’s ongoing supply side reform, which had big impact on market supply.

SHANGHAI, Nov. 16 (SMM) – China’s aluminum market started a round of destocking in 2016 amid the country’s ongoing supply side reform, which had big impact on market supply. Will low stocks continue into 2017?

“Aluminum stocks in China will grow quickly in 2017 due to restarted and new capacity,” Liu Xiaolei, SMM senior aluminum analyst warned at the SMM 2016 China Metals Summit (CMS) in Shanghai from Nov. 10-11.
Aluminum Inventories Fall Sharply as Capacity Cuts Yield Result
Aluminum prices tumbled in 2015, with SHFE aluminum index down to record low, which triggered capacity cuts. Nearly 30 smelters slashed a total aluminum capacity of 4.17 million tonnes, allowing aluminum stocks to decrease dramatically in 2016.

SMM statistics showed aluminum stocks in domestic five major markets reached 2016’s high at 928,000 tonnes in March, but tumbled to record low of 241,000 tonnes in early August, although inventories rebounded slightly for some time afterwards.

SMM Summit 2016: China Aluminum Supply to Shift into Surplus in 2017
However, aluminum stocks fell back slightly after September, due mainly to slow shipments from northwest China. Freight charges by trucks increased after China introduced new transport policy on September 21. Smelters thus turned to railway shipments, causing lots of aluminum ingots to be piled up at railway stations in Xinjiang, disrupting inventory growth in consumer markets. SMM learned over 200,000 tonnes of aluminum ingots are now piling up in Xinjiang, which might take at least two months to digest.

Collections of Stories in Base Metal Market at SMM 2016 Annual Summit
Tight Aluminum Supply Pushes Up Spot Premiums
Tight supply drove up spot aluminum premiums this year. SMM data showed spot premiums in domestic aluminum market averaged 81 yuan/tonne during January-October, once reaching 620 yuan/tonne, versus an average discount of 96 yuan/tonne in 2015.

Aluminum Stocks to Return to Growth in 2017
SMM expects aluminum stocks in China to grow next year, citing output release from restarted and new capacity.

Aluminum capacity in China will reach 41.50 million tonnes by the end of 2016 and rise to 44.50 million tonnes by 2017. Nearly 3 million tonnes of new aluminum capacity will come online each year over the next two years. Expanding aluminum consumption and low-cost capacity will become major drivers behind capacity expansions.

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