Inventory Buildup Remains in the "Fast Lane," Domestic Aluminum Ingot Inventory Surpasses Last Year's Peak [SMM Analysis]

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Entering late February, domestic aluminum inventory performance remains lackluster, with inventory buildup still on the "fast track." The recent upward trend in aluminum prices has also been somewhat hindered by inventory performance. According to Shanghai Metals Market (SMM) data, as of February 24, 2025, the total social inventory of domestic aluminum ingots and billets rose to 1.194 million mt, surpassing the key thresholds of 1 million mt and 1.1 million mt consecutively, and is now approaching the 1.2 million mt mark. Specifically, inventory surged 69,000 mt WoW (up 6.1%), increased by 266,000 mt compared to the first day after the holiday (February 5), and accumulated an increase of 479,000 mt compared to the pre-holiday baseline (January 27). On a YoY basis, the inventory buildup in the third week after the holiday ranks among the top in terms of both volume and growth rate over the past seven years.

For aluminum ingot inventory, despite liquidity in the market recovering after the Lantern Festival and a slight increase in aluminum ingot outflows from warehouses over the past week, SMM statistics show that aluminum ingot outflows from warehouses totaled 119,100 mt in the past week, up 7,600 mt WoW. However, domestic aluminum ingot inventory continues its post-holiday buildup momentum. According to SMM data, as of February 24, 2025, the social inventory of domestic aluminum ingots reached 873,000 mt, with available inventory climbing to 747,000 mt, up 28,000 mt from last Thursday, showing no signs of slowing in the buildup pace. Notably, on a YoY basis, the inventory increase in the second week after the Chinese New Year exceeded that of the same period last year, with the intensity of the buildup ranking relatively high over the past seven years. The current inventory buildup of domestic aluminum ingots slightly exceeds expectations.

SMM analysis suggests that although the current inventory accumulation is slightly above expectations (with inventory already surpassing last year's peak of 865,000 mt), the Q1 inventory peak is expected to be around 950,000 mt. However, with March approaching, driven by the "golden March and silver April" seasonal demand, downstream operating rates are expected to rebound steadily, and in-transit cargoes in east and central China are already showing a declining trend. SMM predicts that the first destocking period this year is likely to occur around the sixth week after the holiday (mid-March), similar to previous years. Close monitoring of the intensity of production resumption, the release of in-transit cargoes, and the fulfillment of end-user orders will be necessary to adjust the timing and peak level of the inventory turning point.

For aluminum billet inventory, according to the latest SMM data, as of February 24, 2025, the social inventory of domestic aluminum billets reached 320,700 mt, up 5,400 mt WoW. The overall inventory buildup rate remains manageable, with Wuxi, Foshan, and Nanchang ranking as the top three contributors to the inventory increase. Notably, downstream extrusion plants accelerated production resumption after the Lantern Festival, driving a rebound in outflows from warehouses. The past week's outflows totaled 51,500 mt (up 7,300 mt WoW), setting a new high for the year. Although some aluminum billet producers may have adopted volume discount strategies, this still reflects a certain degree of end-user restocking demand. Based on the inventory evolution patterns over the past seven years following the Chinese New Year, SMM predicts that the inventory turning point for aluminum billets is likely to appear earlier than that for aluminum ingots, with the turning point expected to occur by late February or early March. The Q1 inventory peak is projected to be around 350,000 mt. With the traditional "golden March and silver April" peak season approaching and downstream operating rates continuing to recover, the market is closely watching the actual impact of consumption recovery on the destocking process.

On the demand side for aluminum billets, the overall operating rate of the domestic aluminum extrusion industry was 69.5% over the past week, remaining flat WoW. In terms of specific segments, leading enterprises in the industrial extrusion sector maintained high operating rates. Automotive extrusion companies had sufficient orders, with new capacity gradually coming online. The outlook for PV extrusion enterprises remains positive, with SMM surveys indicating that major companies' order volumes are steadily increasing, driven by seasonal growth in production plans. Notably, the newly introduced PV grid connection policy has yet to have a significant impact on the industry, and no large-scale rush for installations has been observed. In the construction extrusion sector, leading enterprises resumed production quickly, leveraging their orders on hand, while residential-related orders remained relatively weak. Commercial projects, such as industrial parks, accounted for a higher proportion. Overall, despite variations across segments, the industry's comprehensive operating rate remains stable. SMM will continue to monitor inventory trends, changes in downstream demand, and the impact of industry and regional policies.

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