Signs of aluminum ingot inventory buildup emerge initially; focus on key periods in the latter half of the month [SMM Analysis]

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According to SMM statistics, as of June 23, the inventory of aluminum ingots at major domestic consumption areas stood at 464,000 mt, an increase of 15,000 mt from last Thursday and an increase of 6,000 mt WoW from Monday. In terms of outflows from warehouses, the weekly outflows of aluminum ingots at major domestic consumption areas over the past week were 108,800 mt, a decrease of 11,500 mt WoW.Although domestic aluminum ingot inventory was just a stone's throw away from the year's low of 440,000 mt last Thursday, after the weekend, with the concentrated arrivals of in-transit goods and the weakening outflow performance due to the suppression of high aluminum prices in the near term, today's aluminum ingot inventory statistics showed an inventory buildup, marking the largest increase this month and sparking market concern. Among them, the Gongyi region was affected by a significant weakening of downstream rigid demand for cargo pick-up, difficulties in consuming imported supplies, and concentrated arrivals of north-west China supplies, resulting in an inventory buildup of 14,000 mt, becoming the main factor contributing to the overall inventory buildup in China this week.

SMM believes that the sustained high aluminum prices are suppressing consumption, coupled with the increasingly strong off-season atmosphere in the downstream sector, with all types of end-use demand showing weakness. The aluminum billet destocking has been sluggish, confirming the inventory buildup turning point first. According to past patterns, the domestic aluminum ingot inventory turning point generally appears 2-3 weeks later than that of aluminum billets. Given that there is still an expectation for a slight increase in the proportion of liquid aluminum in China in June, SMM expects that in the short term, the overall domestic casting ingot volume will remain relatively low, supporting the continued destocking trend. However, due to the expectation of a slight increase in casting ingots at a small number of aluminum plants, there has been a slight increase in north-west China supply and shipments recently, as well as inter-regional transfers due to price spreads. The recent increase in arrivals has already exerted significant pressure on east China, potentially alleviating the tight supply situation to some extent.

Looking ahead, the recent high and strong operation of aluminum prices is expected to have a certain suppressive effect on domestic demand during the off-season. There is an expectation of weakening outflows from warehouses, leading to slowing pressure on overall domestic destocking in the second half of the month. Meanwhile, the disturbance of imported supplies cannot be ignored. Before the signal of transitioning from the off-season to inventory buildup becomes clear, it is necessary to closely monitor the key period in late June to determine whether there will be consecutive inventory buildups in domestic aluminum ingot inventory and whether the domestic aluminum ingot inventory buildup turning point can truly arrive.

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