'Chinese aluminium imports advance 40% y/y in September'

 

 

Combined with a robust domestic production at 1.58Mt gained 21% y/y and a 47Kt draw in SHFE stocks over the month, apparent consumption of primary aluminium increased by a robust 25% y/y to 1.64Mt. This indication of demand strength ties in well with the NBS semis production figure, which showed a 27% y/y increase to 2.4Mt, Barclays said.

 

 

While domestic demand certainly appeared firm, aluminium semis exports fell by 15% m/m to 230Kt, the lowest level since February, signalling some softening in aluminium semis demand overseas. The alumina picture also remained constrained with imports down 8% y/y to 222Kt and domestic production down sequentially tumbled 6% m/m to 2.8Mt, suggesting some constraint at a primary smelting level.

 

 

Looking beyond September, the rise in SHFE stocks of nearly 40Kt in October so far would appear to point towards a moderate softening in conditions. However, given that price signals remain firmly positive, with the premium of SHFE to LME strengthening in October versus September, as well as sustained tightness in the SHFE time spreads, there is little sign of any significant unwind in market tightness.

 

 

Moreover, it is clear that the power situation in southern China remains extremely tight, and with SHFE prices at their lowest level since May this year, there is a lack of price signal to drive an immediate supply response. Domestic demand remains healthy and although export weakness appears to creeping into the semis data, the overall level remains enough to keep the market tightly balanced.