Aluminum billet production has remained high for several months. Will it pull back in June? [SMM Analysis]

The supply of domestic primary aluminum billets has remained abundant since May. Despite the slow upward movement of domestic aluminum prices in May, which helped to recover the 20,000 yuan/mt threshold and led to a decline in aluminum billet processing fees, the impact of tariff wars on downstream exports was less severe than expected. Additionally, during the transition between the off-season and peak season, domestic demand remained generally stable. The social inventory of aluminum billets, which was still at a low level compared to the same period in the past three years, supported the center of aluminum billet processing fees to remain near the critical cost warning line of 300 yuan/mt. Therefore, against the backdrop of the continued upward momentum in the proportion of liquid aluminum, aluminum billet enterprises across the country maintained a high production pace in May. The daily average production of domestic primary aluminum billets in May remained flat MoM at approximately 49,000 mt/day.

According to the latest monthly survey data from SMM, there are currently 173 sample enterprises in the SMM monthly survey of primary aluminum billets, with a total capacity of 31.805 million mt, unchanged from the previous month. In May 2025 (31 days), the total production of primary aluminum billets nationwide was 1.509 million mt, an increase of 41,000 mt or 2.8% MoM from April 2025 (30 days), and an increase of 52,000 mt or 3.6% YoY. The operating rate of domestic primary aluminum billets in May was 56.9%, up 1.5% MoM. Regionally, due to an increase in the number of effective operating days MoM in May and minimal impact from the Labour Day holiday on production, aluminum billet production in various provinces across the country increased to varying degrees, driving the proportion of liquid aluminum nationwide to continue to rise in May.

Entering June, low domestic and overseas inventories triggered a wave of market "cornering" sentiment, with spot aluminum prices surging and approaching the 20,000 yuan/mt threshold. The sustained high aluminum prices suppressed consumption, coupled with the increasingly strong off-season atmosphere in the downstream sector, leading to weak performance in various types of end-use demand. The aluminum billet destocking momentum was sluggish, and the turning point for inventory buildup was approaching. Aluminum billet processing fees "took a nosedive" amidst the already challenging situation. The supply-demand pattern gradually collapsed, with some consumption areas even experiencing "zero processing fees" or "negative processing fees." Aluminum billet producers once again faced severe inventory and capital pressures. According to SMM survey statistics, the in-plant inventory of domestic aluminum billet enterprises in mid-June was approximately 107,700 mt, an increase of 21,400 mt or 24.8% MoM. The average days of inventories reached 2.2 days, an increase of 0.4 days MoM. SMM believes that due to the overall satisfactory performance of aluminum billet processing fees in H1, there is still significant uncertainty regarding the subsequent trend under short-term pressure in early June. Producers are basically choosing to maintain a basic level of stable production. Most aluminum billet enterprises are still normally executing long-term contracts for liquid aluminum in June, making only marginal adjustments within adjustable ranges and remaining cautious about whether to cut production. However, some billet plants in south-west China currently have a certain willingness to cut production. If processing fees continue to remain low, it cannot be ruled out that the scale and extent of production cuts will further expand. For the time being, SMM expects that domestic primary aluminum billet production in June may see a relatively significant pullback from the high levels in May, to approximately 1.4-1.45 million mt.