SMM

After two months of decline, aluminum ingot social stocks in China’s eight major markets grew 28,000 mt WoW to 462,000 mt as of January 4, but still 114,000 mt lower than a year ago. Considering that some cargoes were held as collaterals, stocks available for sale were 336,000 mt. However, current stocks are still the lowest compared to the same period over the past seven years, and goods in circulation remain in tight supply. The overall inventory build-up was primarily contributed by Henan’s Gongyi region, where previous environmental protection-induced production restrictions on local downstream plants hurt aluminum consumption. However, heavy air pollution alert in Henan has now been lifted, which will allow downstream production to resume, thereby boosting demand and alleviating local inventory pressure. A closed import window and continued impact of previous output cuts in Yunnan on shipments mean the inventory accumulation may not last long in the first half of this month. Affected by downstream enterprises taking an early break for the Chinese New Year and possible decline in the share of aluminum liquid output, aluminum ingot social stocks will face risk of growing in the second half of the month. SMM projects that the inventory peak around the CNY holiday should be in the range of 550,000-600,000 mt.