China’s social inventories of aluminum billet experienced a significant drop of 9,600 tonnes week-on-week, falling to 158,400 tonnes as of March 30, according to the Shanghai Metals Market survey. This represents a steeper decline compared to the previous week, which saw a drop of only 1,500 tonnes. Some warehouses in east China stopped obtaining billet stocks, contributing to lower inventories. Additionally, a significant amount of billet stocks directly arrived at downstream processing plants instead of social warehouses, which also contributed to the weekly inventory downfall.
Wuxi and Huzhou were the two provinces that contributed the most to the fall of aluminum billet inventories this week. In Wuxi, billet inventories fell 6,500 tonnes W-o-W to rest at 28,400 tonnes, followed by a decline of 5,000 tonnes in Huzhou to 25,000 tonnes. However, in contrast, aluminum billet inventories in Foshan accumulated 1,600 tonnes over a week to close at 95,000 tonnes. Meanwhile, inventories in Changzhou and Nanchang inched up by 200 tonnes and 100 tonnes, respectively, to come in at 5,900 tonnes and 4,100 tonnes.
The overall decline in inventory levels may be attributed to several factors, including limited increase in downstream operations, a lack of confidence in future orders, and cautious downstream buyers hesitant to make purchases due to high aluminum prices. In addition, output cuts by smelters and an increased share of molten aluminum threatening the production of billets could further extend the destocking of aluminum billet inventories until April.
Overall, this trend in aluminum billet inventory levels has significant implications for the global aluminum market. Lower inventory levels can lead to higher prices, while higher inventory levels can lead to lower prices. In the short term, the decline in inventory levels may result in higher aluminum prices, which could impact downstream industries that rely on the metal. However, if inventory levels continue to decline, it could lead to supply shortages, which would drive prices even higher. It remains to be seen how these inventory trends will affect the aluminum market in the long run.