In late March, with the arrival of the traditional peak season, the operating rate of aluminum downstream processing enterprises continued to rebound, boosting the performance of domestic aluminum social inventories. After domestic aluminum billets inventories began to drop at the end of February, aluminum ingot inventories also showed signs of declining at the end of March, which is in line with previous expectations. In April, high aluminum price will somehow inhibit the destocking, and domestic inventories grew slightly after the Qingming Festival. On Apr 8, 2024, SMM data showed that the social inventory of aluminum ingots in China’s eight major markets was 863,000 mt, (the amount for sale stood at 737,000 mt), up 16,000 mt WoW, but down 175,000 mt YoY, remaining at the lowest compared to the same period of past seven years. Aluminum ingot inventories growth after Qingming Festival was mainly affected by the concentrated arrival of goods during the holiday. It is worth noting that after the import window in Shanghai closed, the supply of imported goods dropped to a low level. The recently available imported goods on the market have also been quickly digested, so the rapid destocking trend continued after Qingming holiday, with a destocking of 4,000 mt compared with Apr 3.
The outflow of aluminum ingots from warehouses also continued to decline due to Qingming Festival. According to SMM statistics, the outflow of aluminum ingots from warehouses in the first week of April was 102,000 mt, down 4,900 mt WoW. However, SMM believes that outflow from warehouses is unsatisfactory considering two fewer working days in the week. Supported by rigid demand, the spot market's adaptability to current aluminum prices significantly improved. In March, the aluminum ingot inventory began to drop later than expected. Three factors contributed to it. 1. Continuous interference from imported sources due to the opening of the import window in early March, and inventory decline in domestic bonded area. 2. Rising aluminum prices encouraged some aluminium smelters to release inventories on hand, but downstream traders were on the sidelines. 3. Downstream extrusion factories had a stronger desire to purchase aluminum billets than aluminum ingots. Taking south China as an example, the processing fee of aluminum billets fell below the range of 200-300 yuan/mt since March. The aluminum billets supplies in Guangxi and Guizhou significantly lowered their quotations to sell in large quantities, suppressing the market price of billets. Amid the declining processing fees, aluminum billets with relatively low prices were more popular with downstream extrusion factories due to their rigid demand.
SMM believes that although the bonded area inventory increased significantly recently, the import window closed and there was no hope of opening it. The impact of imported supplies on the spot market weakened, and the interference of imported aluminum ingots on social inventories has been relatively limited. However, domestic aluminum and aluminum billets companies still have a certain amount of inventory on hand. Concentrated arrivals occasionally occur amid high aluminum prices. Although downstream production is in the peak season, the adaptation of downstream to high aluminum prices still needs to be observed. SMM predicts that high aluminum price in April will somehow inhibit the destocking of aluminum products. The domestic aluminum ingot inventory in early April may drop slightly. We need to pay attention to the changes in the supply and demand of aluminum billets and the demand in the downstream peak season.
