Slow downstream consumption and possible work suspension to put pressure on ingot prices in China

As updated by SMM, buyers in the spot aluminium markets in east and south China held back from purchasing on Monday June 25 as future prices fell in the morning. Transactions in Shanghai were mostly heard at RMB 14,080-14,110 per tonne with discounts of RMB 50-40 per tonne against the SHFE 1807 contract. In Wuxi and Hangzhou, transactions were done at RMB 14,080-14,110 per tonne and RMB14,130-14,140 per tonne, respectively. Below table shows today's ingot prices in the major China markets:

In Guangdong, most transactions were heard at RMB 14,200-14,230 per tonne with Guangdong-Shanghai price spreads at about RMB 140 per tonne. Increased orders from downstream processers in Guangdong in comparison to east China led to such better pricing. Downstream processers in south China market have already stocked their raw material inventory.

Aluminium ingot consumption is likely to be affected in Gongyi, Henan province as local downstream processors may face work suspension during July and August. As learned by SMM, barring top 30 enterprises, all gas emission-related industrial plants in the city will be required to suspend their smelting furnaces for one month during the period following a government order. 

According to SMM this will affect small and medium-sized cast coil producers as July and August is the traditional low season for aluminium plate/sheet and strip producers. Major plate/sheet and strip producers that are in the list of top 30 enterprises are exempted from the restrictions.

SMM forecasts spot discounts on aluminium ingot are expected to widen in the region following the suspensions, while supply of cast coil would be tightened in the specified provinces. Production of aluminium hot-rolled coil, cold-rolled coil and foil are not expected to see any impact. Tighter cast coil supply may cut down export orders to accommodate domestic orders.