1. Aluminum Ingot Inventory: Retreat of 300,000 mt from Highs, Destocking Slope Steepening
According to SMM, as of June 30, China’s aluminum ingot inventory in major consumption areas stood at 1.165 million mt, with single-week destocking of as much as 77,000 mt. Cumulative destocking from the year’s high of 1.465 million mt in early May reached 300,000 mt. Destocking remained strong this week—aside from Shanghai, which was disrupted by imported supply, all other regions saw broad-based destocking, with the three major consumption hubs (Wuxi, Foshan, and Gongyi) each recording single-week destocking of over 10,000 mt.
In terms of seasonal patterns, over the past three years aluminum ingot inventory has consistently exhibited a cyclical characteristic of building inventory around the Chinese New Year, peaking around April-May, and gradually destocking in Q2. The 2024 peak was about 880,000 mt, the 2025 peak about 880,000 mt (basically flat vs. 2024), while the 2026 peak reached around 1.48 million mt, about 600,000 mt higher than the previous two years—a historically high level on a YoY basis, indicating a marked amplification of supply accumulation pressure since the beginning of this year. However, the 2026 inventory trend clearly differed from the prior two years: while the absolute inventory level remained far higher than the same period in the previous two years (about 400,000-450,000 mt higher), the absolute destocking volume (300,000 mt) had already substantially surpassed the full-year destocking in both 2024 and 2025. The destocking slope was the steepest in the past three years.
Reviewing this destocking cycle, the pace shifted from gradual to accelerated: after inventory peaked at 1.465 million mt in early May, the initial destocking pace was mild; from mid-June onward, destocking accelerated notably. In less than three weeks from June 11 to June 30, inventory pulled back further from 1.312 million mt to 1.165 million mt, with destocking of nearly 150,000 mt—a daily average of about 7,500 mt—more than doubling the daily average of about 3,000 mt in May.
II. Driving Factors: Three Forces Resonated, Warehouse Withdrawals Hit a Four-Year High
1. Supply Side: Proportion of Liquid Aluminum Rose, Casting Ingot Volume Continued to Shrin
According to SMM statistics, China’s aluminum output in June 2026 (30 days) increased by 2.2% YoY and fell by 3.1% MoM. Although weak domestic demand dragged down various sectors, leaving them generally under pressure, aluminum semis export demand provided effective support for domestic liquid aluminum consumption. The proportion of liquid aluminum edged up, with the ratio for the month rising 0.7 percentage points MoM to 77.2%. The main driver was improved profitability for some processed aluminum products—especially aluminum billet processing fees staying high, which drove a slight increase in procurement demand for liquid aluminum and correspondingly compressed casting ingot volume. Meanwhile, standardization of China’s aluminum capacity continued to advance, limiting the room for actual supply growth of aluminum ingot.
2. Demand Side: Withdrawals Surge in a Pulse Pattern, Hitting a Near-Four-Year High
This week, China’s aluminum ingot warehouse withdrawals surged to 170,000 mt (+28,700 mt WoW), hitting a near-four-year single-week high. Looking at the seasonal pattern of warehouse withdrawals over the past three years, 2026 had not shown a clear YoY advantage before, but recent data marked a qualitative breakout.
Regional Breakdown of the Surge:
Wuxi: Led with the largest increase in withdrawals, contributing the bulk of the increment;
Foshan: Withdrawals rose in tandem, reflecting strong demand elasticity in South China;
Gongyi: Withdrawals were steady, with a relatively mild destocking pace.
However, the surge in withdrawals does not reflect a broad-based recovery in domestic demand, but rather a structural phenomenon driven by a “substitution effect.” After aluminum prices pulled back, the cost advantage of aluminum ingot over billet became prominent, prompting downstream buyers to switch from billet to ingot. Meanwhile, substitution between primary aluminum and aluminum scrap is also at play—with scrap supply tight and prices high, some secondary aluminum enterprises increased their primary aluminum purchases, further boosting aluminum ingot withdrawals.
3. Substitution Effect: The Triangular Linkage Among Aluminum Ingot, Aluminum Billet, and Aluminum Scrap
One of the core driving forces in the current market remains the demand substitution between aluminum ingot and aluminum billet:
Aluminum billet processing fees are high, and downstream profile enterprises, under cost pressure, tend to directly purchase aluminum ingots for remelting and processing;
The absolute level of aluminum prices pulls back, the spot-futures price spread is expected to strengthen, and the cost-effectiveness of spot aluminum improves;
Aluminum scrap supply is tight, the price difference between primary metal and scrap narrows, and some secondary aluminum enterprises increase their procurement proportion of primary aluminum (aluminum ingots).
This substitution logic is already clearly reflected in inventory data: While aluminum ingot destocking accelerates, the pace of aluminum billet destocking slows down markedly. The divergence between the two inventory curves is exactly side evidence of the substitution effect taking hold.
III. July Outlook: Destocking Logic Unchanged, 1 Million mt Threshold in Sight
SMM believes that the destocking trend for China’s aluminum ingot inventory has been fully established, with the direction unchanged. The following fundamental factors will jointly drive the destocking to continue:
Proportion of liquid aluminum staying high: The proportion of liquid aluminum rose to 77.2% in June and is expected to have slight upside room in July, keeping casting ingot production under continuous compression;
Export demand support (phase-specific in June): Overseas aluminum supply shortages in June drove a surge in aluminum semis export orders, effectively absorbing liquid aluminum capacity; however, in July, as the price spread between Chinese and overseas markets narrows, export momentum may weaken marginally;
Supply normalization: Progress in normalizing China’s aluminum capacity limits room for production growth, with relatively small pressure on the aluminum ingot supply side;
Substitution effect continuing: High aluminum billet processing fees and a tight aluminum scrap supply are unlikely to ease in the short term, leaving room for further substitution demand for aluminum ingots.
If the destocking pace in July maintains the current slope, inventory is expected to pull back below 1.1 million mt by mid-July, and could reach and fall below the 1 million mt mark by month-end. At that point, the absolute inventory level will shift from "the highest in the past three years" to a state where the gap with the same period in 2024-2025 significantly narrows. However, it should be noted that July is the traditional consumption off-season, and whether the destocking pace can continue to accelerate remains uncertain. The key verification point is whether warehouse withdrawals can sustain a level above 130,000 mt.
Key observation indicators: ① Whether the weekly operating rate of aluminum extrusion and other downstream sectors stops falling; ② Whether absolute warehouse withdrawals in China, particularly in east China and south China, can remain high; ③ The price trend of aluminum, changes in the price spread between Chinese and overseas markets, and the sustainability of export order strength; ④ The room for further rise in the proportion of liquid aluminum.
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