Aluminum Billet Inventory Pulled Back Below 200,000 mt, Profile Operating Rate Rebounded to 57.6% [SMM Analysis]

SMM, May 29:

According to SMM statistics, on May 28, aluminum billet inventory in China's major consumption regions fell to 181,500 mt, a significant destocking of 24,000 mt WoW, successfully pulling back below the 200,000 mt threshold. Warehouse withdrawals during the week climbed to 58,900 mt, up 3,200 mt WoW, hitting a new periodic high. The current aluminum billet destocking logic continued to strengthen: on the supply side, warehouse inflows contracted significantly due to production cuts; on the demand side, purchasing sentiment recovered notably as prices stabilized, jointly driving accelerated growth in warehouse withdrawals. Under the dual drivers of supply contraction and demand recovery, the destocking pace was consolidated. If the consumption recovery trend continues, aluminum billet inventory is expected to further pull back to the 160,000-170,000 mt range next week, with further destocking room remaining.

During the week, aluminum prices overall moved sideways in a fluctuating trend, while processing fees across regions showed a pace of holding prices firm, reflecting improvement in the supply-demand pattern. By region, Foshan quoted processing fees at 490/540 yuan/mt, up 140 yuan/mt WoW; Wuxi quoted 300/360 yuan/mt, up 120/100 yuan/mt WoW; Nanchang quoted 300/350 yuan/mt, up 110 yuan/mt WoW. The rise in aluminum billet processing fees, apart from the impact of aluminum prices being in the doldrums during the week, was also attributable to the fact that aluminum billet inventory in south China and Wuxi had already pulled back to early January levels. Combined with the digestion of in-factory inventory, aluminum billet inventory had entered a virtuous cycle. Based on the recent improvement in the aluminum billet supply-demand pattern, aluminum billet processing fees are expected to hold up well next week, with attention needed on aluminum billet social inventory and aluminum price fluctuations.

This week, the operating rate of China's aluminum extrusion industry came in at 57.6%, up slightly by 0.2 percentage points WoW, with the industry's operations continuing a mild recovery trend. Architectural extrusion side, some enterprises organized production based on large-scale engineering project orders on hand, providing support for overall operations. Some enterprises in the Shandong region reported that with temperatures steadily rebounding recently, north China entered the construction window period, boosting end-use demand in areas such as home renovation and window/door replacement. Industrial extrusion side, the recent periodic weakening of aluminum prices increased downstream purchase willingness, driving order increases and boosting operating rate improvements. In addition, PV frame enterprises in Hebei reported that some delivery orders were due in early June, with production schedules increasing this week, driving operations to rise. Overall, although the real estate market recovery remained sluggish, large-scale engineering orders on hand offered volume advantages with longer delivery cycles, forming stable support for recent operations. Combined with rising temperatures boosting home renovation and window/door consumption, architectural extrusion operations will continue to recover; industrial extrusion fundamentals showed strong resilience with stable downstream manufacturing rigid demand, but caution is needed against subsequent aluminum price fluctuations that could suppress downstream purchase sentiment. The aluminum extrusion operating rate is expected to continue its upward trend next week.