Demand-production gap prevents China’s A00 aluminium ingot price from rebounding to early-June level

China’s A00 aluminium ingot price has started the week on Monday, July 15, with a slight increase of RMB 40 per tonne, following a week-long decline of RMB 270 per tonne from July 8 to 12. According to the Shanghai Metals Market, the price has pegged at RMB 20,040 per tonne, with average prices to range between RMB 20,020 per tonne and RMB 20,060 per tonne. The spot contract is likely to be traded at a discount price of RMB 10 per tonne and a premium price of RMB 30 per tonne.

In addition to week-on-week fall, A00 aluminium ingot price also stands lower by RMB520 per tonne than RMB 20,560 per tonne a month ago.

Overall bearish price analysis

The bearish price trend of China’s domestic A00 aluminium ingot is attributed to sluggish demand among the downstream sector in contrast to production growth. In June, China’s aluminium output escalated by 5.56 per cent Y-o-Y to stand at 3.553 million tonnes, owing to capacity resumption in Yunnan to full production and part of the capacity resumption in Huayun Phase III in Inner Mongolia. SMM predicts the domestic production will continue to rise in July with the gradual commissioning and full production of Huayun Phase III project in Inner Mongolia and the gradual resumption of previous renovated projects in Sichuan.

Aluminium ingot price by regions

In Chongqing, A00 aluminium ingot price has increased the higest among all other provinces. Registering a rise of RMB 60 per tonne over the week, the price in Chongqing has come in at RMB 20,010 per tonne. In Shenyang, Tianjin, and Linyi, A00 aluminium ingot price has gained RMB 40 per tonne to reach RMB 19,990 per tonne, RMB 20,090 per tonne, and RMB 20,070 per tonne, respectively. In Gongyi and Foshan, A00 aluminium ingot price has climbed up by RMB 30 per tonne to RMB 19,940 per tonne and RMB 19,850 per tonne, followed by a dip of RMB 20 per tonne in Hangzhou to RMB 20,040 per tonne.

Low-carbon and high-purity aluminium prices

On July 15, China’s domestic low-carbon aluminium price has ascended by RMB 33 per tonne over the weekend to clock at RMB 20,788 per tonne. However, on a week-on-week basis, the price has remained dwindled by RMB 204 per tonne compared to RMB 20,992 per tonne on July 8.

In contrast, China’s domestic high-purity (99.99%) aluminium price has recorded no change after the four consecutive days of downfall from RMB 27,700 per tonne to RMB 27,400 per tonne. Today, the average prices are likely to range between RMB 27,000 per tonne and RMB 27,800 per tonne.

Raw material prices

Bauxite (6.5≤Al/Si＜7.5) price in Guizhou has expanded by RMB 10 per tonne over the weekend to settle at RMB 530 per tonne on July 15, found SMM. The average prices are estimated to range between RMB 510-550 per tonne. Otherwise, in no other provinces, the bauxite price of similar grade has recorded any moves.  In Guangxi, the price has remained muted and steady at RMB 365 per tonne.

The Australian alumina FOB price has inched up by US$1 per tonne to US$480 per tonne on July 15, marking the second consecutive day of increase. However, on a week-on-week calculation, the imported price stands down by US$14 per tonne from US$494 per tonne.

According to SMM, the domestic average alumina price has continued to remain restrained at RMB 3,904 per tonne, demonstrating a steady trend amid substantial demand for aluminium ingot production hike.

Short-term market outlook

In view of SMM prediction on domestic aluminium production rise, A00 aluminium ingot price is likely to remain subdued until the demand recovers to align with higher output levels. Moreover, tariffs being imposed on China’s aluminium are dampening consumption global consumption, preventing prices from experiencing significant growth.