On February 26, SMM data showed that aluminum ingots social inventory totaled 748,000 mt, (622,000 mt for sale), 42,000 mt more than last Thursday, and 257,000 mt more than pre-holiday. The pace of inventory growth remained stable and controllable, staying at the lowest level for the same period in the past seven years.
From a year-on-year perspective, the inventory of aluminum ingots dropped by 395,000 tons compared with the same period in the second week after the holiday last year, and the inventory growth has dropped by 142,000 tons. The inventory growth this weekend was 8.6%, compared with 12.9% in the same period last year. In terms of outflow from warehouses, according to SMM statistics, the outflows in the first week after the holiday was 81,100 tons, which was still a decrease of 4,400 tons from the last week before the holiday.
SMM believes that although domestic aluminum ingots are facing certain inventory pressure after the holiday, the supply of goods circulating in the domestic market is slightly looser. At the same time, due to the recent opening of the import window, spot prices are facing heavy pressure, and the recent spot premiums and discounts have been under pressure. However, after Feb 24, as downstream companies completely resumed work, the outflow from warehouses is expected to return to normal levels in the short term. SMM predicts that low inventory and weak inventory growth will continue to provide certain support for aluminum prices.
Over the weekend, the inventory growth in three places were more than 10,000 tons, and the inventory growth in Wuxi were 15,000 tons. Arrivals remained strong, and the outflows also rebounded significantly. East China spot stocks maintained a stable and small discount after the holiday.
The Gongyi area has an accumulated inventory of 14,000 tons. Although the inventory pressure is still relatively high, as the outflow from warehouses ranked first among the three places last week, the relatively stable performance has provided certain support for the recent spot premiums and discounts in central China.
South China has an accumulated inventory of 10,000 tons. According to SMM research, Guangzhou Bureau's current cargo volume in transit is normal, mainly cargo from the southwest. Due to the recent high cost of truck transportation, some of the cargos originally slated for transportation by truck has been forwarded to the railway, resulting in weekend arrivals. At the same time, weak aluminum prices and premiums and discounts are conducive to post-holiday replenishment downstream. Last week's outflows also rebounded to a certain extent. Although the spot premium in south China has narrowed for four consecutive days, it still maintains a small premium.
Looking back at the inventory before and after the Spring Festival in previous years, it may take 5-6 weeks for aluminum ingot inventory to reach an inflection point after the holiday, but the inventory growth will slow down significantly after 3-4 weeks after the holiday; while the inventory inflection point for aluminum billets will appear 2-3 weeks earlier than aluminum ingots.
However, SMM believes that some time ago, there was a backlog of about 20,000 tons of aluminum ingots at stations in Xinjiang. Weather conditions on the arrival situation are difficult to ignore, and currently domestic aluminum and aluminum billets companies still have a certain amount of inventory at factories, requiring attention.
At the same time, amid high aluminum billets inventories at factories and a year-on-year decline in ingot casting volume after this year’s holiday, whether the turning point for destocking can occur earlier still depends on complete resumption of work in downstream after Feb 24 and the recovery of consumption after the holiday.
SMM predicts that from the end of February to mid-March, domestic aluminum ingot and aluminum billets inventories will still maintain a weak inventory growth. The peak of aluminum ingot inventory after the holiday may be around 850,000 tons. The inflection point of aluminum billets inventory is expected to appear in early March. It is necessary to pay close attention to the recent shipment of aluminum products and the recovery of domestic consumption after the holidays.
