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15 MARCH 2018 AL CIRCLE

Critical dichotomy of rising inventory and winter capacity cut freezes China aluminium market

EDITED BY : BEETHIKA BISWAS 2MINS READ

The winter heating season and capacity cut deadline ends today on Thursday March 15. Aluminium smelters in 28 northern Chinese cities had been told to reduce output by at least 30 percent from Nov. 15 to March 15, although the actual volume cut was below expectations, putting pressure on prices. Stocks of aluminium have grown noticeably so far in 2018, which is indicating subdued demand and already giving rise to concerns about excessive supply.

Average A00 Aluminum Ingot prices are showing a temporary restraint at RMB 13,740 per tonne today.  The prices are expected to range within RMB 13,720 to RMB 13,760 per tonne and spot discounts are expected to settle at RMB 70 to 30 per tonne or about RMB 50 from RMB 350 in February.  The narrowing discount between cash SHFE and physical prices of A00 Aluminum Ingot is reflecting a tightening market and an expected pick-up in nearby demand.  Below graph shows the movement of spot discount in China aluminium market in last three months: 

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In an update from SMM, China's social inventory of refined aluminium including SHFE warrants amounted to 2.28 million tonnes as on Thursday March 14, according to data. This is up from 2.26 million tonnes recorded on Monday March 12. SMM expects the demand to bounce back in the second quarter boosting alumina/aluminium demand. The current inventory status in the major Chinese cities is as follows:

Primary ingot prices registered a slight gain of RMB 15 to 30 per tonne across all domestic markets.  On the cost front alumina and bauxite prices remain unchanged.  Aluminium alloy prices have registered no movement owing to the absence of strong buying trend from downstream producers.

 


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EDITED BY : BEETHIKA BISWAS 2MINS READ

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