Aluminium: Domestic aluminium ingots have been destocked for more than a week due to intensive pre-holiday stocking

On January 18, 2024, SMM data showed that the social inventory of aluminium ingots in China’s eight major markets was 441,000 mt, and the amount available for sale stood at 315,000 mt, down by 18,000 mt WoW. The figure is still the lowest compared with the same period of past seven years. Aluminium prices have fallen below 19,000 yuan/mt, continuing to drive the market's willingness to restock before the holiday, while arrivals did not rise significantly. The destocking of domestic aluminium ingots has continued for more than a week. The supply in the spot market continued to tighten, boosting spot premiums in three major markets last week. The destocking accelerated at the end of 2023. Domestic aluminium ingot inventory has hit new lows for two consecutive weeks before New Year's Day, and the actual inventory for sale is only about 300,000 mt. Heading into 2024, SMM expects aluminium inventory may build up in January: in the first half of the month, due to the continued closure of the import window and the impact of continued production reduction in Yunnan on the arrival of aluminium ingots, the inventory accumulation will be mild. We need to pay attention to the recent opening of the import window, as well as the increase in supply in northern regions such as Xinjiang; in the second half of the month, we need to pay attention to downstream holidays before CNY. Curbed by decline in downstream operating rates before CNY and the decline in the aluminium liquid ratio at the supply, domestic aluminium ingot inventories may once again increase. However, in the past two weeks, due to intensive pre-holiday stocking, the market's consumption of inventory exceeded previous expectations. Therefore, SMM has lowered its pre-holiday inventory forecast. We estimate that the aluminium ingot social inventories across China’s eight major markets may rise to 500,000-550,000 mt by the end of January.