Signs of Inventory Buildup of Aluminum Ingots Emerge, Market to Focus on Key Period in the Second Half of the Month [SMM Analysis]

According to SMM statistics, as of June 23, the inventory of aluminum ingots at major domestic consumption hubs stood at 464,000 mt, an increase of 15,000 mt from last Thursday and an increase of 6,000 mt from last Monday on a WoW basis. In terms of outflows from warehouses, the weekly outflows of aluminum ingots at major domestic consumption hubs over the past week reached 108,800 mt, a decrease of 11,500 mt WoW. Although domestic aluminum ingot inventory was just shy of 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, today's aluminum ingot inventory statistics show an inventory buildup, marking the largest increase this month and sparking market concern. Among them, the Gongyi region experienced an inventory buildup of 14,000 mt, influenced by significantly weakened cargo pick-up for downstream rigid demand, difficulties in consuming imported supplies, and concentrated arrivals of north-west China supplies, becoming the main factor contributing to the overall domestic inventory buildup 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, leading to weak performance across various types of end-use demand. The aluminum billet destocking has slowed down, confirming the inventory buildup turning point first. According to historical patterns, the inventory buildup turning point for domestic aluminum ingots generally occurs 2-3 weeks later than that for aluminum billets. Given the expectation of a slight increase in the proportion of liquid aluminum in China in June, SMM forecasts that, supported by the overall still low casting ingot volume in the short term, inventory is expected to maintain a destocking trend. However, due to the expectation of increased casting ingot production at a small number of aluminum smelters, recent signs of a slight increase in north-west China supply and shipments, as well as regional transfers due to price spreads, the recent increase in arrivals has 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 inevitably suppress domestic demand during the off-season, with outflows from warehouses expected to weaken, putting pressure on the overall destocking trend in the country during the second half of the month. Meanwhile, the impact of imported supplies cannot be ignored. Before the clear signal of the off-season transitioning to inventory buildup, 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 turning point for domestic aluminum ingot inventory buildup will truly arrive.