Aluminum billet consumption is weak, and an inflection point in inventory has initially formed. During the week, the "negative processing fee" trend for aluminum billets reappeared [SMM Aluminum Billet Weekly Review]

SMM News on June 19:

In terms of aluminum billet inventory, according to SMM statistics, the domestic aluminum billet inventory at major consumption areas stood at 1.345 million mt on June 19, an increase of 3,000 mt from Monday and 7,000 mt from last Thursday on a WoW basis. Although inventory levels remain at a low point compared to the same period in the past three years, they are drawing closer to inventory levels in previous years. Meanwhile, since mid-to-late May, aluminum billet inventory has stagnated at around 1.3 million mt, with destocking momentum significantly weakened. This week, inventory has returned above the 1.3 million mt mark, showing signs of bottoming out and stabilizing, indicating that the inflection point for aluminum billet inventory has initially formed. By region, this week, aluminum billet inventory in the Wuxi area dropped back slightly. Affected by both aluminum prices and processing fees, end-users faced significant resistance in fulfilling long-term contracts, while trading activity in the spot market improved somewhat, driving inventory levels down. In the Nanchang area, due to the persistent lack of narrowing in the Guangdong-Shanghai price spread, regional arrivals increased, leading to loose supply of circulating goods. Processing fees first entered a "negative processing fee" state. However, with limited downstream demand and poor trading sentiment, inventory increased significantly. Due to weak processing fees in the Nanchang area, aluminum billet shipments from surrounding rod mills in South China to the Foshan area increased. However, Foshan end-users maintained a wait-and-see attitude, with weak purchasing momentum, leading to a predominant increase in inventory. In terms of aluminum billet consumption, according to SMM statistics, domestic aluminum billet outflows from warehouses totaled 38,200 mt during the period from June 9 to June 15, an increase of 1,800 mt from the previous period. Although aluminum billet outflows from warehouses showed a slight increase, considering the impact of the early Dragon Boat Festival holiday on market transactions, the market consumption rhythm for aluminum billets still shows a weakening trend.

Regarding processing fees, due to the consistently high proportion of liquid aluminum and low social inventory levels of aluminum ingots, SHFE aluminum continued to hold up well this week, with the price center still moving upward. However, in the aluminum billet market, affected by weakened end-use consumption during the off-season and aluminum prices fluctuating at highs, downstream just-in-time procurement remained relatively limited, with many maintaining a wait-and-see attitude. Meanwhile, suppliers had a need to cash in at highs, leading to a sharp decline in regional processing fees, even resulting in a "negative processing fee" situation. As of June 19, 2025, the aluminum billet market in the Foshan area reported processing fees of 80/130 yuan/mt, a decrease of 100 yuan/mt from last Thursday. In the Wuxi area, aluminum billet processing fees were reported at 110/190 yuan/mt, a decrease of 90/80 yuan/mt from last Thursday. In the Nanchang area, processing fees were reported at 0/50 yuan/mt, a decrease of 80 yuan/mt from last Thursday. (Unit: yuan/mt)

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