Dip in construction cuts demand for billets and pushes ingot production

China’s slowdown in construction has affected the aluminium market forcing the smelters to produce more ingots for domestic spot markets moving away from the construction-friendly billets.

The construction of new building has dipped 9.3 percent in the first nine months of this year when compared to the last and real estate accounts for the almost one-third of the total aluminium demand in China, the biggest consumer and producer of the metal.

The mainland is now aiming to increase its export of semi-finished aluminium products which has already risen in the past nine months by nearly 10 percent.

Exporting of primary aluminium in China is uneconomical as it faces a tax of 15 percent but the export of semi-finished aluminium products can well thrive due to the entitled rebate of 13-15 percent.

Billets are the common form of the aluminium used in the construction business as it is easier to create profiles with them. Low construction has lowered the demand for billets and the increased demand for ingots that can be sold at the domestic spot markets.

The records from the top four aluminium consuming cities, Shanghai, Wuxi, Nanhai and Hangzhou shows that the ingot stocks in the warehouse have risen by nearly 10,000 tonnes in the last week pushing the current figure to 620,000 tonnes from the 610,000 recorded late September.