Aluminum ingot destocking encountered obstacles, with sufficient supply and spot discount continuing to widen

Destocking faced obstacles again this week. On June 27, 2024, SMM reported a total social inventory of aluminum ingots at 763,000 mt, (the amount for sale stood at 637,000 mt), up 7,000 mt WoW. Comparing the data with the same period in the past two years and considering the annually increasing proportion of aluminum liquid, SMM believes that the current aluminum ingot inventory is relatively high. The ample aluminum ingots for sale is the reason why aluminum prices can hardly recover to a premium after falling. Last week, domestic aluminum ingot pick-up from warehouses increased by 15,000 mt WoW to 114,700 mt. Despite the increase in pick-up from warehouses, inventory still accumulated. What is hindering the destocking of domestic aluminum ingots? SMM believes there are two reasons: (1) Supply: The gradual resumption of aluminum smelters in Yunnan led to a continuous ample supply of aluminum ingots. (2) Demand: The operating rate of downstream sectors remains weak during the off-season, leading to insufficient procurement based on rigid demand; the low processing fee of primary aluminum products like aluminum billets replaced some of the demand for aluminum ingots. SMM believes that although destocking was unsmooth, the conditions for a sustained accumulation of inventory have not yet formed. Overall, domestic aluminum ingots will continue to destock slowly, and by the end of June, the inventory may drop slightly to around 700,000-750,000 mt.