SMM Analysis Of Short-Term Chinese Aluminium Market Fundamentals

SHANGHAI, Jul 4 (SMM) – The transfer of a 241,000 mt aluminium smelting capacity to Yunnan Hongtai was announced, with Shandong Weiqiao Aluminium & Electricity withdrawing 241,000 mt last month. Resumed operations in Yunnan and Guizhou pushed operating aluminium capacity in China to 40.96 million mt, lower than SMM's earlier estimate of 41.15 million mt. Low conversion margins for aluminium billets led aluminium smelters to produce more ingots rather than liquid aluminium. In China, downstream aluminium operating rates remained weak last week, with a slight operating rate increase only in the aluminium foil sector due to revived demand from the battery and air conditioning markets. However, its sustainability was uncertain. Industrial extrusion orders received by leading companies were boosted by cutting conversion margins, but this didn't stimulate a significant industry-wide operating rate increase. Aluminium plate/sheet and alloy segments maintained stable operating rates, but weak demand could lead to production cuts. Last week, domestic aluminium processing operating rates saw both rises and falls. As we enter July's low season, company orders and short-term operating rates are predicted to drop. High spot premiums over futures could deter downstream purchases. Spot aluminium rises might be limited by slowing aluminium ingot destocking.