In the past week, the domestic aluminum ingot inventory showed slight improvement, and the pick-up from warehouses also stabilized. Last week's pick-up from warehouses increased slightly by 800 mt to 105,200 mt, sending a positive signal to the market. As of August 12, 2024, SMM reported a total social inventory of aluminum ingots at 828,000 mt, (the amount for sale stood at 702,000 mt), down 1,000 mt from last Thursday, marking a slight decrease for a consecutive week. Comparing the data from the same period, it increased by 55,000 mt from the same period last month and was 322,000 mt higher than the same period last year, indicating that the overall inventory performance within the month remained weak. However, approaching the "Golden September," the market has seen a stabilization and warming trend in consumption compared to July. SMM believes that the current low aluminum prices may lead to a rebound and increase in demand for downstream aluminum industrial materials, aluminum plate/sheet, strip and foil, and aluminum wire and cable during the traditional peak season, driving the subsequent consumption of aluminum ingot inventory.
Paying attention to the latest inventory situation in the bonded zones, as of August 8, SMM statistics show that the Shanghai Bonded Zone's aluminium inventory was 39,000 mt, and the Guangdong Bonded Zone's inventory was 4,200 mt, with a total inventory of 43,200 mt, down 900 mt on a weekly basis. Although the inventory changes in the bonded zones were not significant over the past week, there is still a continuous downward trend. Since the end of July, the inventory in the bonded zones has been accelerating its decline, with the Shanghai Bonded Zone's aluminium inventory having decreased by more than 10,000 mt cumulatively. Since early July, the rapid narrowing of aluminium import losses has continued, narrowing to around 200 yuan/mt by the end of July. SMM believes that although the current import losses have slightly expanded after entering August, there is still a possibility of the aluminium import window opening in the future, and the inflow of bonded zone inventory into the domestic market has become a new risk point for aluminum ingot inventory. However, given that the bonded zone inventory only slightly decreased by 900 mt last week, the market does not need to be overly concerned for the time being.
Overall, since H2, the casting ingot production from provinces such as Yunnan, Xinjiang, Inner Mongolia, and Qinghai has been relatively high YoY, with the supply side remaining ample. However, as the traditional peak season for aluminum processing approaches, the casting ingot production in August is expected to decline. Meanwhile, with the September-October peak season approaching, the consumption side has shown signs of stabilization and recovery. Therefore, despite the short-term domestic aluminum ingot inventory still hovering above 800,000 mt, SMM expects that in the second half of August, a turning point in domestic aluminum ingot inventory is likely, with the monthly inventory expected to fluctuate around 750,000-850,000 mt. In a relatively optimistic scenario, the domestic aluminum ingot inventory is expected to fall to around 750,000 mt by the end of August.
Regarding aluminum billet inventory, last week saw an accelerated destocking of aluminum billets. One reason was the continued decline in the inflow of aluminum billets into warehouses; another reason was the stabilization and recovery in aluminum billet consumption and demand compared to July. After the weekend, aluminum billet inventory stabilized at around 100,000 mt. According to the latest statistics from SMM, as of August 12, domestic aluminum billet social inventory was 122,300 mt, with a destocking of 400.0 mt WoW, and pick-up from warehouses decreased by 1,000 mt to 43,400 mt WoW. Among them, Wuxi region saw a destocking of 2,400 mt, and last week's pick-up from warehouses increased by 2,600 mt, making it the best-performing region last week, sending a relatively positive signal. In contrast, Foshan region accumulated 1,000 mt due to a slight increase in arrivals over the weekend, while last week's pick-up from warehouses were weak, decreasing by 3,400 mt WoW. Inventory changes in other regions were all within 1,000 mt. Although the current domestic aluminum billet inventory remains at a three-year high for the same period, the YoY increase stabilized at 45,900 mt. Regarding the future trajectory of domestic aluminum billet inventory, entering mid to late August, with the approach of the "Golden September" and a slight recovery in demand, coupled with limited supply pressure, domestic aluminum billet inventory is expected to remain stable with a slight decline. It is anticipated that the overall aluminum billet inventory in August will remain around 100,000-150,000 mt.
Aluminium billet conversion margins: Due to the recent bottoming out and rebound of aluminium prices and changes in supply and demand, the conversion margins of aluminum billets in three regions have shown a significant pullback, with varying degrees of adjustment. As of August 12, the conversion margins of φ120 aluminum billets in Foshan reported 380 yuan/mt, down 90 yuan/mt WoW. In Nanchang, due to the replenishment of supply, the conversion margins of φ120 aluminum billets were adjusted down to 280 yuan/mt, a significant drop of 150 yuan/mt WoW. In Wuxi, the conversion margins fell 50 yuan/mt WoW to 300 yuan/mt. SMM expects that, supported by the increase in just-in-time procurement as the traditional peak season approaches, the conversion margins of aluminum billets in various regions will remain stable to strong within the month.
Demand side for aluminum billet, early August, the domestic aluminium extrusion market was still in the off-season. Although some downstream customers engaged in bargain hunting, the overall purchase volume was small and did not drive an increase in the operating rate this week. The operating rate of the domestic leading aluminium extrusion industry stabilized this week, recording 50.50%. By different sectors, the order volume for construction extrusion has recently declined significantly, and even leading enterprises can only maintain the operating rate at off-season levels. Additionally, the recently introduced favourable macro policies have not yet shown significant effects, and SMM will continue to monitor their impact. In the industrial extrusion sector, the production for PV modules has not shown a significant increase, while the downstream purchase volume for automotive extrusion has increased, with enterprises producing based on demand. Overall, under the backdrop of the off-season, the market is difficult to achieve significant growth, and it is expected to stabilize in the short term.
