[SMM Analysis] China Aluminum Billet Inventory Eases Slightly, Processing Fees Rebound as Prices Fall

SMM  September 17 ：
According to SMM statistics, as of September 17, aluminum billet inventory in major domestic consumption areas recorded 152,500 mt, down 500 mt from last Thursday (September 10) and down 5,000 mt from this Monday (September 14). The persistent upward trend in inventory since mid-August has shifted slightly, turning into a modest pullback from highs. On a YoY basis, inventory was approximately 17,500 mt higher than the same period in 2025, about 31,000 mt higher than 2024, and roughly 61,000 mt higher than 2023, with total inventory still at the highest level for the same period over the past four years. From the perspective of warehouse withdrawals, aluminum billet withdrawals during September 7–September 14 recorded 38,900 mt, up 2,800 mt WoW, ending the previous period's pullback and indicating marginal improvement in market trading activity. By region, Foshan inventory stood at 75,500 mt, down 1,500 mt from last Thursday; Wuxi recorded 22,000 mt, flat WoW; Changzhou at 17,500 mt and Nanchang at 11,500 mt both saw slight inventory buildup of 500 mt each; Huzhou recorded 26,000 mt, flat WoW. This round of inventory weakening was driven by both supply and demand factors: Demand side, aluminum prices pulled back from last week's highs, downstream acceptance of high aluminum prices rebounded, and purchase willingness improved marginally, leading to a recovery in warehouse withdrawals and exerting some destocking pressure on inventory. Supply side, aluminum billet producers in Guangxi began maintenance-related production cuts this week, raising expectations of supply tightening and easing inbound pressure, further supporting the loosening of high inventory levels. Driven by supply-side maintenance cuts and pre-holiday demand stockpiling, aluminum billet inventory destocking momentum is expected to strengthen next week, with inventory likely to continue its modest pullback. Key focus should be on the actual scale of Guangxi maintenance cuts and the pace of Foshan arrivals digestion.

Aluminum prices shot up and retreated during the week, with SMM A00 aluminum spot prices falling from 24,560 yuan/mt last Thursday (September 10) to 24,180 yuan/mt this Thursday (September 17), a cumulative decline of approximately 380 yuan/mt, with the price center pulling back to around 24,200 yuan/mt. The pullback in aluminum prices, combined with supply tightening expectations, drove processing fees across all regions to rebound across the board. By region, Foshan φ90 aluminum billet processing fees were quoted at 160 yuan/mt and φ120 at 110 yuan/mt, both up 210 yuan/mt from last Thursday, sharply turning positive from negative territory; Wuxi φ90 aluminum billet was quoted at 400 yuan/mt and φ120 at 300 yuan/mt, up 170 yuan/mt and 160 yuan/mt WoW respectively; Nanchang φ90 aluminum billet was quoted at 280 yuan/mt and φ120 at 200 yuan/mt, up 260 yuan/mt and 230 yuan/mt WoW respectively. The broad-based rebound in processing fees this week was driven by two main factors: First, the downward shift in the aluminum price center improved downstream acceptance of high aluminum prices, cooled wait-and-see sentiment, significantly improved purchase willingness, and boosted trading activity. Second, supply-side tightening signals emerged as Guangxi aluminum billet producers began maintenance-related production cuts, raising market expectations of future supply tightening. This repaired the situation where Foshan and Nanchang processing fees had previously fallen into negative territory with producer quotes below cost benchmarks, significantly strengthening producers' willingness to hold prices firm, with processing fees being passively lifted and turning from negative to positive. Notably, despite the sharp rebound in processing fees, Foshan φ90/φ120 and Nanchang φ90/φ120 remain at historically low levels, reflecting that the current supply-demand pattern has not fundamentally reversed and overall supply-side volume pressure persists. Processing fee trends next week are expected to depend on the intensity of Guangxi maintenance cuts and aluminum price movements. If aluminum prices continue to fluctuate at highs and maintenance cuts fall short of expectations, the room for processing fee rebounds will be limited, with attention needed on downstream restocking intensity and the pace of Foshan arrivals.