Aluminum Inventory: Pre-Holiday Stockpiling Accelerates Destocking, Post-Holiday Inventory Buildup Risk Still Requires Vigilance [SMM Analysis]

Driven mainly by pre-holiday restocking demand, and with the slower pace of arrivals since the second half of April, coupled with the temporary end of disruptions from imported supplies, the destocking of domestic aluminum ingot inventory accelerated again by 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, with a destocking of 44,000 mt WoW from Thursday, and a decrease of 177,000 mt YoY, remaining at a relatively 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 from warehouses of domestic aluminum ingots reached 138,800 mt in the past week (from April 21 to 27), with a MoM decrease of 3,300 mt in outflows from warehouses, but still remaining at a relatively high level for the year.

SMM believes that the domestic aluminum ingot inventory had successfully pulled back to around 600,000 mt by the end of April, which, to a certain extent, boosted market confidence ahead of 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 relatively milder pressure. SMM estimates 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 the arrivals of domestic aluminum products 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 a temporary inventory buildup caused by concentrated arrivals after the holiday, which may also exert certain pressure on aluminum price performance after the holiday.

In terms of aluminum billet inventory, according to SMM statistics, as of April 30, the aluminum billet inventory at major domestic consumption hubs reached 151,000 mt, down 11,600 mt from Monday and 26,800 mt from last Thursday, indicating smooth destocking. Benefiting from the recovery in downstream construction extrusion orders and operating rates, the rigid demand for aluminum billets showed a marginal strengthening trend. Coupled with a significant pullback in aluminum prices from earlier periods, the production enthusiasm in the end-use market improved, driving accelerated inventory destocking. Meanwhile, during the concentrated procurement window ahead of the Labour Day holiday, the in-plant inventory of aluminum billet producers remained at a low level. Market suppliers also actively lowered prices before the holiday to accelerate the outflows from warehouses. With fewer arrivals and sustained increases in outflows from social warehouses, the decline in inventory levels intensified. From the outflow data perspective, the weekly aluminum billet outflows from warehouses from April 21-25 were 67,000 mt. Despite a 1,900 mt WoW decrease in outflows from warehouses compared to the previous week, they still fluctuated at highs, 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 fluctuate between 150,000-200,000 mt, with a need to closely monitor the sustainability of consumption after the Labour Day holiday.

On the demand side of aluminum billets, the overall operating rate of the domestic aluminum extrusion industry fell by 0.5 percentage points WoW to 59% in the past week. Observing by sector: In the building materials sector, enterprises reported a slowdown in the decline of the real estate market, with sales showing a rebound trend. The transmission effect of real estate support policies gradually emerged, and infrastructure orders in second- and third-tier cities maintained steady growth. Specifically, orders for curtain walls and doors and windows in central China were saturated. Some enterprises in Shandong and surrounding areas indicated they would maintain normal production during the Labour Day holiday, with current orders on hand for building materials already exceeding those for industrial materials. Leading enterprises in the building materials sector in southern China reported that building material orders have remained stable since the beginning of the year. This week, they continued to implement a produce-based-on-demand strategy, 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 concentrated on production, industry orders showed a downward trend, with limited new orders. The operating rate in this sector dropped back slightly this week. In the PV extrusion sector, influenced by uncertainties during the policy transition period, current module enterprises' production scheduling strategies have become cautious. According to the SMM survey, 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 producers generally lowered their order demand expectations for May by 10%. This week, the operating rates of top-tier enterprises in the PV extrusion sector slightly declined, 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.