Aluminum ingot inventory showed signs of a downward trend, and the expected production resumption in Yunnan will have limited impact on inventory performance [SMM Analysis]

On March 18, 2024, the total social inventory of aluminum ingots was 847,000 tons, and the amount for sale was 721,000 tons, which was 4,000 tons higher than last Thursday and 356,000 tons higher than the accumulated inventory before the holiday. The aluminum ingot inventory has been at a low level for the same period in the past seven years. Since mid-March, the aluminum ingot inventory has almost stagnated, and is infinitely close to the high of 850,000 tons predicted before the holiday. In terms of outflow from warehouses, according to SMM statistics, the outflow of aluminum ingots in the fourth week after the holiday was 109,000 tons, a decrease of 6,900 tons from the third week after the holiday.

According to SMM research, the volume of railway cargo in transit has been relatively low recently, and the downstream operating rate has increased steadily in March. With the arrivals of the traditional peak seasons, the overall aluminum ingot outflow from warehouses remained stable, although it is subject to imported goods, last week's outflow from warehouses fell slightly, but SMM believes that the outflow from warehouses will drop in the short term. At the same time, according to SMM analysis, the first batch of aluminum production in Yunnan is expected to resume in the near future. It has not yet had an impact on the domestic aluminum social inventory in March and the subsequent destocking turning point. It will only have a small impact on the arrival volume in South China after April (daily arrivals are expected to increase by about 2,000 tons), and the overall impact on domestic inventories will be relatively limited.

Recently, the outflow of aluminum billets from warehouses has also declined. However, due to the significant decline in the arrivals, the destocking of domestic aluminum billets has continued and accelerated this week. According to SMM statistics, the domestic social inventory of aluminum billets on March 18 was 249,700 tons, down 8,500 tons WoW. Since the inflection point of destocking, the inventory has dropped by 26,000 tons, except for a slight accumulation in Wuxi. In addition, the destocking of other regions has accelerated this week. In terms of outflow from warehouses, according to SMM statistics, the outflow of aluminum billets from warehouses in the fourth week after the holiday was 50,200 tons, a decrease of 5,700 tons from the third week after the holiday.

Regarding the follow-up trajectory of domestic aluminum ingots and billets inventories, SMM believes that although the import window has been closed, due to the opening of the import window in early March, the recent inflow of imported goods has been relatively large. It is necessary to pay attention to the interference of imported goods on social inventories. Moreover, domestic aluminum ingot and aluminum billets companies still hold stocks, deserving attention. SMM predicts that domestic aluminum ingot inventories will maintain stable in the second half of March before the inflection point of destocking occurs. The high point of aluminum ingot inventories after the holiday may be around 850,000-900,000 tons. The inflection point of aluminum ingot inventories is expected to be this Thursday or next week. Aluminum billets continued to decline steadily after the inventory inflection point appeared. It is necessary to pay close attention to the recovery of domestic consumption after CNY holiday and the performance of downstream peak seasons.