SHANGHAI, Jan 27 (SMM) - As of the second to the last week ahead of the Chinese New Year (CNY), the domestic aluminium inventory stood at 72,500 mt, marking a combined fall of around 300,000 mt in seven consecutive weeks. The continuous fall in inventory was partly caused by the slow resumption of the curbed capacities in 2021. On the other hand, the aluminium ingot imports were drastically reduced after the import window closed. The resilient consumption after the New Year’s Day also contributed to the decrease in total inventories.

The inventory increase is likely to be less than 450,000 mt during the CNY holiday, a low in the past five years. Hence, aluminium prices will still carry support post the holiday. In the mid-term, the overseas production restrictions will keep supporting LME aluminium prices, while domestic aluminium supplies will fall by more than 100,000 mt on a monthly basis after the import window closes. In other words, the short-term inventory accumulation will soon turn to post-holiday reduction. The spot premiums over SHFE aluminium contract will stay firm, evidencing the comparatively tight supply of aluminium ingot post the CNY holiday. The high end of aluminium prices are likely to rise above 22,000 yuan/mt after the CNY holiday.