China aluminium stocks’ collapse might not be indicative of a market turnaround

China’s aluminum stocks stopped growing and fell 37,000 tonnes on a monthly basis as of November 12. However, this slump is unlikely to indicate at a turnaround in market fundamentals.

Market players should be aware that aluminum stocks are actually well above 340,000 tonnes seen a year ago, said industry experts. Shanghai Metal Market analysts attribute the fall mainly to production cuts, growing consumption nearby processors and falling arrivals due to snow in northwest China.

Falling supply from production cuts will be quickly filled up by growing new capacity. Year-end cash crunch will curtail consumption. As such, inventories will remain at current highs for the rest of the year, SMM predicts.