Sluggish demand, slowing output cuts to grow aluminium ingot supplies in Q4

SHANGHAI, Nov 9 (SMM) – Supplies of aluminium ingot in China are likely to expand in the fourth quarter of 2018 as demand is expected to continue to be sluggish, SMM expects.

SMM data showed that China produced 3.114 million mt of primary aluminium in October, from 3 million mt in September.

While losses forced many primary aluminium producers to cut output this year, with close to 1.35 million mt of capacity cut thus far this year, new capacity came onstream. SMM estimates that more than 2 million mt of new capacity is likely to come online across 18 producers this year.

SMM research found that monthly operating primary aluminium capacity held relatively stable in July-October, at around 37.4 million mt.

Some traders told SMM that some primary aluminium producers stepped up output of aluminium ingot due to sluggish sales of molten aluminium. This generated some inflows of aluminium ingot to the market.

Towards the end of the year, capacity reduction is likely to slow as adequate capacity allow producers to take more bank loans.  

Economic data across real estate, automobile and home appliances sectors failed to pick up in the third quarter. Weak demand across these sectors are likely to continue into the last quarter of the year.

SMM learned that snowfall slowed operation at some construction sites in Gansu and Shaanxi, and this cemented expectations of weak consumption of extrusions and flat-rolled products in aluminium for the fourth quarter.

While SMM expects gains in aluminium ingot supplies in the fourth quarter, there is expected to be limited upside room with the potential for more capacity cuts.