This Week, the Aluminum Billet Supply Side Faced Multiple Pressures, with Processing Fees Pulling Back Significantly Amid Seasonal Off-Season Demand [SMM Aluminum Billet Weekly Review]

SMM, January 16:

Regarding aluminum billet inventory, according to SMM statistics, as of January 16, domestic aluminum billet social inventory stood at 151,100 mt, with an inventory buildup of 14,100 mt WoW. The buildup pace has slightly slowed, but as downstream sectors have mostly entered the holiday phase this week, aluminum billet transactions are expected to enter a phase of nominal pricing without actual trades. On a YoY basis, the gap compared to the same period last year widened further to 67,300 mt, remaining at a high level for the same period in the past three years. SMM expects that domestic aluminum billet inventory may continue to build up in January, potentially reaching 180,000-200,000 mt before the Chinese New Year, with post-holiday inventory peaks around 300,000-350,000 mt. Regarding outflows from warehouses, driven by the final round of pre-holiday concentrated restocking by downstream sectors and the "volume discount" strategy in processing fees, last week's aluminum billet outflows from warehouses increased by 7,000 mt WoW to 42,100 mt. Excluding the impact of the holiday factor, the increase was slight, but subsequent aluminum billet outflows are not expected to be optimistic.

This week, with the macro cycle warming up and aluminum inventory destocking exceeding expectations, aluminum prices have shown a steady rise. However, aluminum billet processing fees have faced multiple pressures, and market sentiment has hit a freezing point. Currently, aluminum billet manufacturers in the market have gradually shut down furnaces and reduced production, focusing on equipment maintenance before the holiday. However, considering the issue of liquid aluminum consumption, upstream aluminum smelters may exert pressure on aluminum billet manufacturers. Even during the Chinese New Year, aluminum billet plants plan to maintain the operation of a small portion of their capacity. By region, Foshan saw a slight decline in aluminum billet shipments this week. Against the backdrop of weak processing fees, some suppliers opted for hedging without selling, while some downstream buyers pushed for lower prices. The processing fee for φ120 aluminum billets was 90 yuan/mt, down 140 yuan/mt WoW. In Wuxi, suppliers showed a need for cash realization, but downstream purchasing has entered the final stage before the holiday, leading to a significant drop in processing fees. The processing fee for φ120 aluminum billets was 130 yuan/mt, down 250 yuan/mt WoW. In Nanchang, purchase willingness in the market was poor, while supply continued to increase slowly. The market experienced nominal pricing without actual trades, with the processing fee for φ120 aluminum billets at 160 yuan/mt, down 210 yuan/mt WoW.
 

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