Aluminum billet inventory increased by over 20% in a single week! Processing fees continued to trade at a discount [SMM Aluminum Billet Weekly Review]

SMM Jan. 15:

According to SMM statistics, aluminum billet inventory in mainstream domestic consumption areas stood at 206,000 mt on Jan. 15, up 21,500 mt from Monday and 36,500 mt WoW. During Jan. 5-11, total warehouse withdrawals of domestic aluminum billets amounted to 38,500 mt, up 4,500 mt WoW due to the impact of the New Year holiday. Inventory-wise, Wuxi, Foshan, Nanchang, and Huzhou all saw a faster pace of inventory buildup, with Foshan experiencing a sharp inventory surge due to concentrated arrivals of shipments from the north. On one hand, constrained by persistently high prices and seasonal downstream impacts, extrusion plants showed significantly insufficient buying sentiment, with demand continuing to weaken. On the other hand, although the operating rate of billet plants declined slightly, the overall supply reduction was insufficient, leading to piled-up in-factory inventory and shipments starting to be sent to warehouses, with supply-side pressure continuing to increase. Against the backdrop of aluminum prices holding up well, the aluminum billet industry maintained a supply-demand imbalance, with total inventory still climbing. It is expected that aluminum billet inventory may reach 250,000 mt by month-end.

As domestic and overseas macro sentiment remained strong, SHFE aluminum hit a record high during the week and stayed high without a significant correction trend. Against the backdrop of continued strong aluminum prices, aluminum billet processing fees extended declines initially during the week, then saw slight recovery, remaining in a deep adjustment phase. By region, Foshan was at -50/0 yuan/mt, up 90 yuan/mt WoW; Wuxi was at -50/0 yuan/mt, up 100 yuan/mt and down 50 yuan/mt WoW respectively; Nanchang was at -150/-100 yuan/mt, flat WoW. Due to the difference between current prices and the monthly average price last month, there were varying liquidation needs in the market, leading to chaotic processing fee quotes and significant price differences. Coupled with seasonal bearish factors such as strong fear of high prices downstream and weak demand, liquidation needs were further stimulated, causing aluminum billet processing fees to operate below parity. Under the current oversupply pattern, aluminum billet processing fees are expected to remain in the doldrums. However, due to price spread factors, low-priced spot cargo sources are relatively limited, and processing fees are expected to converge to parity or above.