Aluminum billet inventory continued to decline

As some producers sold at close to costs in order to promote sales, the downstream aluminium extrusion weekly operating rate remained good, and aluminum billet supply reduced, domestic aluminum billets inventory continued to fall in late May, exceeding previous expectations. According to SMM survey, the disruption in aluminum billet supply in Guangxi has not been fully resolved. Although some production resumption in Tianyang caused billet arrivals to increase 2,600 mt in South China over the weekend, rising aluminum prices mean that the local aluminum billet production is still far from full recovery, and the possibility of further production cuts remains. The arrivals in South China decreased by 4,000 mt WoW mid-week. According to SMM statistics, as of May 23, the social inventory of domestic aluminum billets was 181,100 mt, down 12,100 mt WoW. After the holiday, the overall stocks of aluminum billets continued to drop, falling by nearly 50,000 mt in the past half month. Although it is still at a high level for the same period in nearly four years, the gap with the same period last year is currently only about 40,000 mt. The amount of aluminum billets picked up from warehouses decreased by 3,300 mt WoW to 52,400 mt. Amid high aluminum prices, the supply-demand imbalance of aluminum billets increased again in May, and the supply is still expected to decrease. It is expected that the inventory will drop slightly, and may continue to remain below 200,000 mt within the month.

Due to the wide fluctuations in aluminium prices, the conversion margins of φ120 billets in three regions (Nanchang, Foshan, Wuxi) once dropped to 0 yuan/mt, 70 yuan/mt, and 160 yuan/mt, respectively. Although there was a rebound, the overall performance remains weak. SMM expects that it will be difficult for the conversion margins to find significant support, which may remain low in May.