On Apr 22, 2024, SMM data showed that the social inventory of aluminum ingots in China’s eight major markets was 831,000 mt, (the amount for sale stood at 705,000 mt), down 13,000 mt WoW and 75,000 mt YoY, remaining at the lowest compared to the same period of past seven years. A total of 119,200 mt of aluminum ingots were withdrawn from warehouses across the eight major markets last week, up 7,700 mt WoW. The gradual increase in outflow from warehouses led to decline in domestic aluminum ingot inventories in mid-to-late April. In addition to continued closure of the import window, decline in aluminum prices, and the support of rigid demand during the downstream peak season, SMM believes that the domestic aluminum ingots inventory dropped as market's adaptation to the current aluminum price significantly improved, the aluminum ingot factory inventory returned to a lower level, and the downstream prepared stocks in advance before the Labour Day holiday.

From a regional perspective, the three major consumer areas all experienced varying degrees of destocking over the weekend. In east China, inventories in Shanghai remained stable, while inventories in Wuxi fell slightly by 2,000 tons compared with last Thursday, and the volume of shipments last week increased by 4,100 tons compared with the previous week. Among them, the arrival volume over the weekend dropped sharply by nearly 8,000 tons compared with the previous week, and the concentrated arrivals improved significantly. The outflow from warehouses increased by 1,500 tons compared with the previous week. In central China, inventories in Gongyi fell by 4,000 tons compared with last Thursday, and both the arrivals and outflow from warehouses continued the previous good performance. Since late March, the inventory has been destocked for more than a month. The recent inventory performance in south China deserves attention. Foshan does not seem to have been affected too much by first batch of resumption of production in Yunnan for the time being. The inventory dropped by 6,000 tons again compared with last Thursday, and the destocking has been further consolidated. The arrival volume in the middle of last week decreased by nearly 2,000 tons, while outflow from warehouses increased by more than 4,000 tons. Over the weekend, while the outflow from warehouses remained stable, the arrivals in two days dropped sharply by nearly 4,400 tons month-on-month, and concentrated arrivals also improved significantly.

In terms of aluminum billets inventor, affected by the wait-and-see sentiment, price cuts in the downstream has become very common. Under the pressure of inventory and capital, the supply has to make concessions on its own and exchange price for volume. Amid downstream peak season, the market supply and demand significantly improved their adaptability to the recent aluminum prices. Although the operating rate of leading aluminum extrusion companies showed a slight decline last week, the continued support of rigid demand before the holiday does not seem to affect the willingness of downstream companies to replenish inventory. According to SMM statistics, on April 22, the domestic social inventory of aluminum billets were 245,000 ton, a significant decrease of 11,700 tons compared with the previous Thursday. Although it is still at a high level in the same period of the past four years, the outflow of aluminum billets from warehouses last week was 64,400 tons, a significant increase of 12,900 tons from the previous month. As the arrival of goods declined slightly, the outflow of aluminum billets from warehouses rose sharply for two consecutive weeks, dragging down the social inventory of aluminum billets. Aluminum billets inventories in major domestic consumption areas experienced varying degrees of destocking, while weekly outflow from warehouses increased. The destocking and outflow from warehouses closely linked.

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. At the same time, as high aluminum price continued for a long time, after concentrated arrivals, the in-factory inventory of domestic aluminum and aluminum billets enterprises declined, aluminum ingot in-factory inventory returned to a lower level. SMM predicts that although the overall high aluminum price in April will somehow inhibit the release of aluminum products, amid peak season, the market's adaptation to the recent aluminum price significantly improved. Driven by the rigid demand for stocking before the Labour Day holiday, it is expected that the overall domestic aluminum ingot inventory will continue to slightly decline before the holiday; and amid high aluminum prices, the contradiction between supply and demand of aluminum billets eased due to price-for-volume. Downstream frequently replenished stocks before the holiday, and increasing outflow from warehouses is expected to effectively drag down aluminum billets inventory before the holiday. We need to pay attention to the market's stocking sentiment before the holiday and the arrivals after the holiday.