Aluminium Prices Fall 2.22% as Domestic Inventory Has Increased for Three Consecutive Weeks, Attention Should Be Paid to the Pre-holiday Restocking and Inventory Changes

SHANGHAI, Jan 4 (SMM) - Yesterday, the prices of non-ferrous metals performed weakly, especially the SHFE aluminium. SHFE aluminium prices fell more than 2% and finally fell 2.22% to 18,270 yuan/mt, the lowest point in nearly two months.
LME aluminium also weakened and fell 0.78 to $2,359.5/mt as of 16:55.
In the spot market, the spot price of SMM A00 aluminium ingot stood at 18,300-18,340 yuan/mt as of January 4, with an average of 18,320 yuan/mt, down 360 yuan/mt from the previous trading day. The spot price also hit the lowest point in nearly two months.

The spot goods were in discounts of 30 yuan/mt over SHFE 2301 in east China, flat from the previous trading day, or discounts of 20 yuan/mt over SMM A00 aluminium ingot in Wuxi. The spot goods in Gongyi were in discounts of about 170 yuan/mt over SMM A00 aluminium price, 30 yuan/mt lower than that of the previous trading day.
On the macro front, there was no favourable news, and the market was generally concerned about important data such as the minutes of the Federal Reserve’s interest rate meeting in December and the non-agricultural employment report in December.

In terms of fundamentals, the increase in the aluminium supply in December may be less than expected as the power shortage extended in Guizhou. But the overall supply remained stable as the aluminium factories in Guangxi and Sichuan continued to resume the production.

On the demand side, the current operating rates of downstream processing plants fell again as the new orders were few amid the seasonal low. As the Chinese New Year is approaching, some companies plan to take vacation early, hence the actual demand is expected to weaken further.

The inventory has accumulated for three consecutive weeks after hitting the low point, and increased 14% during the New Year’s Day holiday, which weakened the support for aluminium prices. According to SMM statistics, as of January 3, the domestic social inventory of aluminium was 561,000 mt, an increase of 6,800 mt from last Thursday and a decrease of 241,000 mt from the same period last year.
SMM believes that the future market transactions will weaken further due to the increasing inventory as the output of aluminium ingots gradually increases and the consumption will decrease amid the Chinese New Year holiday.

Therefore, as the bulls on the macro front pays off and the fundamentals weaken, SMM believes that short-term aluminium prices will remain volatile. SMM will pay attention to the downstream pre-holiday restocking and inventory changes.