Inventory Buildup Before the Holiday Is Inevitable, Aluminum Ingot Inventory Falls Below the Low Level of the Same Period [SMM Analysis]

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In Terms of Aluminum Ingot Inventory,According to SMM statistics, as of January 20, 2025, the social inventory of domestic aluminum ingots was 455,000 mt, and the circulating aluminum inventory was 329,000 mt, with an inventory buildup of 15,000 mt WoW. On a YoY basis, the current domestic aluminum ingot inventory increased by 18,000 mt compared to the same period last year, losing its position at the lowest level in nearly three years. Outflows from warehouses,According to SMM statistics, last week, domestic aluminum ingot outflows from warehouses dropped significantly by 28,900 mt WoW to 120,100 mt.According to the SMM survey, railway transportation in Qinghai has fully resumed this week.

Over the weekend, east China mainly received shipments from Xinjiang, Qinghai, and Ningxia. Although arrivals slightly increased, due to strong outflows last week, Wuxi continued destocking by 2,000 mt. Feedback from warehouses in Gongyi indicated that weekend arrivals were primarily from Xinjiang via railway, with fewer shipments from other regions. With transportation returning to normal, Qinghai also recently shipped to Gongyi by rail, leading to an inventory buildup of 6,000 mt in Gongyi. South China saw a noticeable increase in arrivals,and lastweek, large, medium, and small downstream enterprises began holiday-related production cuts, with operating rates declining significantly, resulting in a 7,000 mt inventory buildup in Foshan.SMM believes that the supply pressure of domestic aluminum ingots before and after the Chinese New Year cannot be ignored, while the overall domestic aluminum demand remains in an off-season atmosphere. By year-end, downstream enterprises have already entered the holiday phase. Meanwhile, aluminum prices staying above 20,000 mt significantly dampened downstream purchasing interest, making weaker aluminum ingot outflows inevitable. Regarding arrivals, with Xinjiang's transportation having normalized for some time, in-transit volumes are expected to continue increasing in the two weeks before the holiday, potentially intensifying pressure in the spot market. The turning point for inventory buildup ahead of the Chinese New Year has essentially been confirmed.

SMM expects that with the end of concentrated restocking before the holiday and the rebound in aluminum prices, domestic aluminum ingot inventory in the second half of January may enter a phase of continuous buildup. By the eve of the Chinese New Year, domestic aluminum ingot inventory may build up to around 500,000 mt, with the Q1 peak likely to reach 850,000-900,000 mt. Although the forecast for the Q1 peak is lower than the previous estimate of 1-1.1 million mt due to the unexpected inventory performance following the aluminum price pullback since December, the post-holiday peak of domestic aluminum ingot inventory may still exceed last year's level due to a significant YoY increase in casting ingot production. In Terms of Aluminum Billet Inventory,

Despite some billet plants planning production cuts or halts during the Chinese New Year holiday, most primary aluminum billet plants maintained normal production in mid-January. As downstream enterprises have largely entered the holiday phase, aluminum billet transactions have entered a phase of "prices but no market," with overall circulating supply remaining ample.

As of January 20, domestic social inventory of aluminum billets stood at 177,800 mt, with an inventory buildup of 26,700 mt WoW, marking the fastest buildup rate this month. On a YoY basis, the gap with the same period last year widened further to 67,100 mt, remaining at a three-year high. SMM expects domestic aluminum billet inventory to continue building up in January, potentially exceeding 200,000 mt by the eve of the Chinese New Year, with the post-holiday peak likely around 350,000 mt. Regarding outflows from warehouses, last week, aluminum billet outflows from warehouses dropped significantly by 13,100 mt WoW to 29,000 mt.On the Demand Side for Aluminum Billets,

The domestic aluminum extrusion operating rate recorded 35.5% last week, down 11 percentage points WoW.The main reason is that the domestic aluminum processing sector has gradually entered the Chinese New Year break cycle. In south China, large, medium, and small enterprises all began holiday-related production cuts, with operating rates declining significantly, while only a few enterprises continued production during the holiday with new orders. Sample enterprises in Shandong plan to start their holiday next week, with operating rates already showing weakness this week. In east China, automotive extrusion and PV extrusion production continued, with automotive extrusion orders performing better than the same period last year. Meanwhile, PV module manufacturers reduced orders under stockpiling for the Chinese New Year, but the decline was better than expected, supporting the operating rates of related enterprises. It is expected that after stockpiling is completed next week, extrusion plants will also gradually enter the holiday phase. Overall, domestic aluminum extrusion enterprises are gradually entering the holiday phase, with operating rates showing a clear seasonal decline. 

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