Supply cuts in China to continue to lower aluminium inventory in 2019

SMM senior analyst Mr Liu Xiaolei said that as consumption grew faster than supply, the inventory destocking cycle across Chinese aluminium market lasted for an extended period in 2018 and is expected to continue in 2019 with broad-based supply cuts. Supply-side reform and winter production curbs slowed primary aluminium output growth in 2018, Liu told the delegates at 2018 China Aluminium Processing Industry Chain Summit in Guangzhou, Guangdong province, on Thursday December 6.

Mr Liu expects primary aluminium consumption in China to grow by 4.5% in 2018 and by 3.3% in 2019. SMM data showed that China’s actual consumption of primary aluminium increased by 7.9% in 2016 and by 9.1% in 2017.

Growth of primary aluminium output in China is estimated to stand at 0.6% in 2018 and to quicken to 3.6% in 2019. Output expanded by 3.9% in 2016 and by 14.2% in 2017.

With waning cost supports, the most traded SHFE aluminium contract is likely to trade at CNY 13,000-14,500 per tonne in the first half of 2019 with its LME counterpart at USD 1,850 to USD 2,050 per tonne, Liu expects. In the second half of the year, prices are expected to strengthen to CNY 13,500 to CNY 15,000 per tonne for SHFE aluminium and USD 1,900 to USD 2,100 per tonne for LME aluminium.

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