Asian Aluminium Ingot Prices are Witnessing a Spiraling Trend

In the Asian market, Aluminium Ingot prices surged this week. In India, National Aluminium Company Limited (NALCO) has raised the prices for Aluminium products by more than INR 11,000/Tonne since the last cut on July 15. Market players are experiencing the same hike of roughly 2.5% on NALCO's Aluminium billets, wire rods, and ingot prices. NALCO bases the prices of its Aluminium ingots and Aluminium products on the three-month futures of Aluminium on the London Metal Exchange (LME), which increased by nearly USD 130-140/tonne during July 15-20. Thus, the authorities of NALCO were forced to soar Aluminium prices by roughly 2.5%. Additionally, domestic Aluminium supply maintained an upward trend in the Chinese market. Several smelters in China reduced their production slightly due to staggered power usage, while some smelters kept their average production rate.

As per market players, the primary Aluminium inventories in China witnessed a steep downfall on a week-on-week basis across eight major consumption areas. The Aluminium ingot inventory has suddenly begun declining in July. Delayed arrivals of stocks and shipments coupled with the transportation stagnancy due to the pandemic are gradually two-folding the impact on ingot volume in Wuxi. While in Gongyi, the main issue appears to be local buyer intake, which increases regional inventory stress. Furthermore, the European Central Bank (ECB) raised interest rates more aggressively than expected last Thursday, as inflationary concerns overshadowed growth concerns. The European Central Bank (ECB) increased its benchmark deposit rate by 50 basis points to zero, rather than the 25 basis points it had previously guided. Consequently, domestic Aluminium supply continued to rise.

In addition, consumption of aluminum ingots and billets in South China has decreased significantly. According to manufacturers, demand was relatively strong in eastern China and moderated in central China. Due to limited railway capacity in Xinjiang, fewer arrivals occurred, allowing the domestic Aluminium Ingot inventory to decline further. Despite the continued expansion of operating capacity, the domestic Aluminium supply is insufficient. If Aluminium prices fall further, some loss-making smelters may have to conduct maintenance.

As per ChemAnalyst, the lower inventory and high cost will support Chinese Aluminium prices in the near term, while poor overseas demand will prevent Aluminium prices from increasing. Based on the supply-demand outlook, recent arrivals, and shipment density, the Asian Aluminium Ingot inventory will likely fluctuate sideways or down this week.