China’s aluminium ingot inventories are depleting faster than expected; SMM expects 2023 to round up at 500,000 tonnes

According to the Shanghai Metals Market survey, China's domestic aluminium ingot inventories are decreasing faster than expected. The estimated reason is the production cut in Yunnan, resulting in slower arrivals of stocks to warehouses.

As per the data shown on December 7, the inventories halted at 560,000 tonnes, reflecting a decline of 29,000 tonnes from Monday, December 4, and a downfall of 38,000 tonnes from the previous Thursday, November 30. SMM estimates if this downtrend accelerates further, the Chinese primary aluminium inventories will reach as low as around 500,000 tonnes.

However, in the rest of this month, inventory depletion may face disruptions because lessened aluminium billet production in northern regions will lead to a potential cast ingot volume increase in some areas. Alongside, the inflow of imported ingots will rise as import windows open.

Shanghai Metals Market estimates that primary aluminium production in China will grow in December 2023 to 3.56 million tonnes, up by 2 per cent from 3.49 million tonnes in November. But compared to October 2023, the output is expected to stand 2.22 per cent lower than 3.641 million tonnes.

By the end of November, China's total aluminium built-in capacity was 45.19 million tonnes, while the operating capacity was 41.89 million tonnes, according to SMM.

Regarding aluminium billet inventories, they stood at 85,600 tonnes on December 7, indicating a depletion of 8,600 tonnes since Monday and a fall of 7,800 tonnes week-on-week. Compared to the same period last year, when Chinese billet inventories were at 71,600 tonnes, the difference has narrowed to only 14,000 tonnes. However, stocks remain high relative to the same period in the past three years.

Going ahead in December, with the ease of supply-side pressure on aluminium billets, the inventory downtrend will weaken towards the year's end, as estimated by SMM.