The pace of inventory buildup for aluminum billets continues, with the decline in processing fees accelerating [SMM Weekly Aluminum Billet Review]

December 25, SMM News:
According to SMM statistics, on December 25, the inventory of aluminum billets in mainstream domestic consumer areas stood at 124,500 mt, an increase of 1,500 mt from Monday's inventory and an increase of 5,000 mt from Thursday's inventory. According to SMM statistics, during the period from December 15 to December 21, the total warehouse withdrawals of domestic aluminum billets amounted to 45,900 mt, an increase of 2,700 mt from the previous week. During the week, due to the recovery of transportation capacity in Xinjiang, warehouse arrivals increased significantly, leading to a slight inventory buildup. By region, due to the cycle and sequence of railway transportation, the aluminum billet inventories in Wuxi and Nanchang increased first, while no significant increase in inventory was observed in the Foshan area. However, the current price spread in processing fees between the east China and south China markets is 200-300 yuan/mt, and subsequent logistics directions for aluminum billets will prioritize shipments to the south China region. On the consumption side, amid weakening year-end consumption and the suppression of persistently high aluminum prices, market transactions are transitioning to weakness. Additionally, with renewed pressure from the supply side, processing fees in some regions are under significant pressure. SMM expects that with continuous shipments from the Xinjiang region, aluminum billets will continue to arrive and exert sustained pressure on the supply side. Meanwhile, due to insufficient year-end consumption expectations on the demand side, the market will experience a significant oversupply, and aluminum billets will maintain a phased inventory buildup pace, with inventories expected to range between 120,000-140,000 mt next week.

This week, the center of aluminum prices rose again, operating above the monthly average price. Coupled with the impact of inventory buildup, the aluminum billet processing fees in Wuxi and Nanchang came under significant pressure during the week, while the inventory of aluminum billets in the south China region remained at historically low levels, less than 20kt, with local processing fees remaining firm. The processing fee in the Foshan area was reported at 380/430 yuan/mt, a decrease of 20 yuan/mt WoW; in the Wuxi area, it was 150/230 yuan/mt, a decrease of 100/150 yuan/mt; and in the Nanchang area, it was 90/140 yuan/mt, a decrease of 110 yuan/mt. SMM expects that with continuous shipments from the Xinjiang region, aluminum billets will continue to arrive and exert sustained pressure on the supply side. Meanwhile, due to insufficient year-end consumption expectations on the demand side, the market will experience a significant oversupply. It is expected that processing fees will remain under pressure next week, but caution is also warranted regarding the rebound impact of aluminum price pullback risks on aluminum billet processing fees.