The domestic aluminum ingot inventory after the holiday is better than expected, boosting aluminum prices [SMM analysis]

On May 6, 2024, SMM data showed that the social inventory of aluminum ingots in China’s eight major markets was 794,000 mt, (the amount for sale stood at 668,000 mt), up 3,000 mt from Apr 30, but down 41,000 mt YoY, remaining at the lowest compared to the same period of past seven years. Comparing the inventory during the Labor Day holidays in the past three years, the accumulated inventory was 46,000 tons after the holiday last year, and inventory declined by 18,000 tons after Labour Day holiday in 2022. The outflows of aluminum ingots from warehouses last week was 88,400 mt, down 29,400 mt WoW. SMM believes that the accumulation of domestic aluminum ingots after the holiday is better than expected before the holiday. The main reason is that the inventory pressure of upstream aluminum plants eased and the overall delivery slowed down, resulting in fewer arrivals during the holiday.

From a regional perspective, inventory performance in the three major consumer areas diverged during the holiday period. In east China, inventory decreased by 4,000 tons compared with pre-holiday, while inventory increased by 8,000 tons in Wuxi. The total arrivals during the five-day holiday was 31,000 tons. Although there was a concentrated arrival, the outflow from warehouses was 23,000 tons, and the overall performance was controllable; the inventory in south China remained stable compared with the pre-holiday period, with only inflow of 9,700 tons during the holiday, which was significantly lower than the pre-holiday expectation. It was reflected that the disturbance on the supply of aluminum billets in Guangxi before the holiday had no obvious impact on the supply of aluminum ingots, but it is still necessary to pay close attention to the subsequent development of the incident; and inventory dropped by 5,000 tons in Gongyi during the holiday, which attracted widespread attention from the market: According to SMM research, the reasons for inventory decline were: 1. The recent ingot volume in Qinghai decreased slightly, and the overall arrival volume during the holiday has not met expectations, but the subsequent arrival is expected to accelerate; 2. Affected by long payment orders, downstream customers required delivery during the holiday or after the holiday after placing an order before the holiday, boosting outflow from warehouses during the holiday.

There were varying degrees of concentrated arrival of aluminum billets in major domestic consumption areas during the holiday period. The inventory growth of domestic aluminum billets inventory was more obvious after the holiday. It was reflected that the disturbance on the aluminum billets supply in Guangxi before the holiday had not yet caused a significant impact on intensive arrival of aluminum billets during the holiday, and the inventory pressure of aluminum billets factories was still heavy. According to SMM statistics, the domestic social inventory of aluminium billets on May 6 was 230,000 mt, up 12,200 mt from Apr 30, and up 72,300 mt YoY, remaining at a high level compared to the same period of past four years. Comparing the aluminum billets inventory during the Labor Day holidays in the past three years, 18,000 tons were destocked after the holiday last year, and 46,000 tons were accumulated after the holiday in 2022.The outflow of aluminum billets from warehouses last week was 51,900 mt, down 16,600 mt WoW.

Regarding the subsequent domestic aluminum ingot and aluminum billets inventories, affected by the five-day Labor Day holiday, the short-term inventory growth of domestic aluminum inventories is normal, and domestic aluminum ingots accumulation after the holiday is better than expected, boosting the aluminum price after the holiday; the supply disturbance in Guangxi before the holiday has not yet had a significant impact on the performance of domestic inventories. SMM predicts that in May, as the traditional peak season gradually transitions to the off-season and aluminum prices remain strong, demand may weaken; under the condition of weak supply and demand of aluminum ingots, it is expected that domestic aluminum ingot inventories will continue to run around 800,000 tons in one to two weeks after the holiday; and in the face of a higher base price, the contradiction between supply and demand of aluminum billets in May has increased again, and at the same time, the arrival pressure on the supply of aluminum billets has not been alleviated. It is expected that the inventory of aluminum billets will fluctuate in the short term after the holiday, and the inventory of aluminum billets in May may run above 200,000 tons. We need to pay close attention to fluctuations on the supply after the holiday and downstream consumption performance.