Stockpiling Before the Holiday Accelerated Destocking, While the Risk of Inventory Buildup After the Holiday Still Requires Vigilance [SMM Analysis]

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Driven mainly by pre-holiday restocking demand, and with the slower pace of arrivals since the second half of April, coupled with the temporary conclusion of disruptions from imported supplies, the destocking of domestic aluminum ingot inventory accelerated again at the end of April, approaching the 600,000 mt mark, providing a certain degree of upward support for aluminum prices before the holiday.According to SMM statistics, as of April 30, the inventory of aluminum ingots at major domestic consumption hubs stood at 614,000 mt, down 29,000 mt from Monday this week, a destocking of 44,000 mt WoW from Thursday, and a decrease of 177,000 mt YoY, remaining at a low level compared to the same period in the past three years.In terms of outflows from warehouses, despite a slight pullback WoW, the total outflows of domestic aluminum ingots for the past week (from April 21-27) reached 138,800 mt, with a MoM decrease of 3,300 mt in outflows, yet still remaining at a relatively high level for the year.

SMM believes that the domestic aluminum ingot inventory had smoothly fallen back to around 600,000 mt by the end of April, which, to a certain extent, boosted market confidence for the upcoming off-season. However, based on in-transit data and feedback from multiple sources, the Gongyi and Foshan regions will face relatively severe pressure from concentrated arrivals after the holiday, while the Wuxi region will experience a relatively milder situation. SMM expects that the total arrivals in the three regions during the Labour Day holiday will be approximately 72,000 mt, an increase of about 10,000 mt YoY. Specifically, the planned arrivals in Wuxi will be approximately 22,000 mt, a decrease of about 10,000 mt YoY; the planned arrivals in Foshan and Gongyi will be approximately 20,000 mt and 30,000 mt, respectively, each increasing by about 10,000 mt YoY.SMM believes that domestic aluminum product arrivals during this year's Labour Day holiday may be higher than those of the same period last year. Attention should be paid to the risk of phased inventory buildup caused by concentrated arrivals after the holiday, which may also exert certain pressure on aluminum prices post-holiday.

In terms of aluminum billet inventory,according to SMM statistics, as of April 30, the aluminum billet inventory at major domestic consumption hubs was recorded at 151,000 mt, down 11,600 mt from Monday and 26,800 mt from Thursday last week, with a smooth destocking performance.Benefiting from the improvement in downstream construction extrusion order operating rates, the rigid demand consumption for aluminum billets has shown a marginal strengthening trend. Coupled with the significant pullback in aluminum prices from earlier periods, the production enthusiasm in the end-use market has shifted positively, driving an accelerated destocking of inventory. Meanwhile, during the pre-Labour Day holiday stockpiling window, concentrated procurement led to the maintenance of low-level operation of in-plant inventory at aluminum billet producers, while suppliers in the market also proactively lowered prices before the holiday to accelerate the pace of outflows from warehouses. With fewer arrivals at social warehouses and a continuous increase in outflows, the decline in inventory levels intensified. From the perspective of outflow data, the weekly outflows of aluminum billets from April 21-25 were 67,000 mt. Despite a MoM decrease of 1,900 mt in outflows last week, they still operated at a high level, indicating the continuation of end-use consumption resilience. Post-holiday aluminum billet inventory may face inventory buildup due to increased arrivals at social warehouses as producers maintain normal production during the holiday.SMM expects aluminum billet inventory to operate within the range of 150,000-200,000 mt, with a need to closely monitor the sustainability of consumption after the Labour Day holiday.

On the demand side for aluminum billets, the overall operating rate of the domestic aluminum extrusion industry fell by 0.5 percentage points MoW to 59% in the past week.Observing by segment: In the building materials sector, enterprises reported a slowdown in the decline of the real estate market, with sales showing a rebound. The transmission effect of real estate support policies has gradually emerged, and infrastructure orders in second- and third-tier cities have maintained steady growth. Specifically, orders for curtain walls and doors and windows in central China are saturated, with some enterprises in Shandong and surrounding areas indicating that they will maintain normal production during the Labour Day holiday. Currently, the volume of orders on hand for building materials has exceeded that for industrial materials. Leading enterprises in the building materials sector in South China reported that building material orders have remained stable since the beginning of the year, and they continued to implement a produce-based-on-demand strategy this week, with minimal raw material stocking before the holiday, only maintaining inventory levels necessary for safe production. In the automotive extrusion sector, affected by the insufficient momentum of enterprises that had previously experienced concentrated order releases, industry orders have shown a downward trend, with limited new orders. The operating rate in this sector experienced a slight pullback this week. In the PV extrusion sector, affected by uncertainties during the policy transition period, current module enterprises have adopted a cautious production scheduling strategy. According to SMM surveys, due to the mismatch between the module production cycle and the grid connection deadline, current production orders cannot be completed and connected to the grid before the May 31 period. Coupled with the fact that follow-up policy transition documents have not yet been issued, downstream module manufacturers have generally lowered their order demand expectations for May by 10%. The operating rates of top-tier enterprises in the PV extrusion sector declined slightly this week, mainly shifting to execute production schedules for newly signed orders in May. Relevant enterprises have no plans to halt production during the Labour Day holiday and will maintain normal production. SMM will continue to track the actual implementation of orders in various sectors.

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