Aluminum billets break free from the "negative processing fee" situation, with slightly improved market transactions [SMM Weekly Review of Aluminum Billets]

SMM News on July 17:

According to SMM statistics, the aluminum billet inventory in major domestic consumption areas stood at 156,000 mt on July 17, a decrease of 5,000 mt from Monday and a decrease of 4,000 mt from last Thursday. In terms of outflows from warehouses, the total outflows from warehouses of domestic aluminum billets during the period from July 7 to July 13 were 44,200 mt, up 9,400 mt MoM. After the inventory buildup turning point for aluminum billets was established in mid-June, inventory levels have continued to rise, reaching the highest level for the same period in three years. However, aluminum billets achieved a slight destocking during the week. Does this indicate that the inventory buildup turning point for aluminum billets has already formed?

This round of slight destocking for aluminum billets was mainly driven by the impact of production cuts in aluminum billets and the restocking of downstream rigid demand. Since entering July, aluminum billet manufacturers have been receiving news of production cuts due to the accumulation of in-plant inventory and unoptimistic order expectations, in order to alleviate operational pressure on funds. Meanwhile, the scale of production cuts in regions such as Guangxi, Yunnan, and Guizhou continues to expand, resulting in fewer arrivals in the South China region and the Nanchang region during the week. Despite the off-season atmosphere in the market, downstream players mainly focused on digesting raw material inventory in the early stage due to the high aluminum prices. This week, the price center loosened somewhat, stimulating downstream rigid demand restocking, thereby driving down aluminum billet inventory. SMM believes that although the production cuts by aluminum billet manufacturers have alleviated the arrival pressure on the supply side, the current restocking of rigid demand is more of a short-term driver, and the main theme of the downstream off-season has not changed. Therefore, from a long-term perspective, aluminum billet inventory will still maintain the rhythm of inventory buildup, and the overall trend has not changed significantly. SMM expects that aluminum billet inventory will fluctuate between 150,000-180,000 mt next week.

 

In terms of processing fees, SHFE aluminum prices first fell and then rose this week, with a downward trend in the price center. Both bulls and bears in the market are still dynamically competing, and the spot price center continues to fluctuate at highs. Due to the downward shift in the aluminum price center, suppliers and billet manufacturers, considering their own costs, have promptly raised processing fees with the intention of refusing to budge on prices. As a result, aluminum billet processing fees have recovered, breaking away from the "negative processing fee" situation. The transaction performance in the aluminum billet market during the week was noteworthy. The pullback in aluminum prices drove downstream rigid demand restocking, and market transaction sentiment slightly recovered. As of July 17, 2025, the aluminum billet market in the Foshan region reported processing fees of 170/220 yuan/mt, up 140 yuan/mt from last Thursday; the aluminum billet processing fees in the Wuxi region were reported at 180/240 yuan/mt, up 70/80 yuan/mt from last Thursday; and the processing fees in the Nanchang region were reported at 80/130 yuan/mt, up 110 yuan/mt from last Thursday. Looking ahead, downstream consumption is still under the influence of the off-season atmosphere, and order expectations remain unclear. However, the price pullback is expected to drive a slight improvement in aluminum billet consumption. However, the inventory of aluminum billet manufacturers is still being digested, and it is expected that aluminum billet processing fees will still run below the cost line of 300 yuan/mt in the short term.

》Order to view historical spot metal prices from SMM

》Click to view the SMM aluminum industry chain database