SHANGHAI: Aluminum stockpiles in the main trading regions in China have climbed to the highest level in two years as growth in supply outpaces demand in the world’s largest user, according to two industry surveys.
Reserves in Shanghai, Wuxi and Hangzhou, and in Guangdong province gained to about 940,000 tons as of Oct. 22, the highest since September 2010, according to Wen Junxiang, head of the research department at Guangzhou KT Commodity Information & Consulting Co.
Stockpiles more than doubled this year to about 1 million tonnes, the largest since July 2010, said Zhang Chenguang, an analyst at data provider SMM Information & Technology Co.
The estimates add to signs of a glut in the second-largest economy as new capacity, especially in the west, helps to boost output to the highest ever even as China’s manufacturing shrinks. Aluminum in London has dropped 13 percent over the past year, and Alcoa Inc, the largest US producer, cut its forecast for global demand growth this month as China’s economy slowed.
“There is no improvement in demand this October,” SMM’s Zhang said in a phone interview in Shanghai. “As new capacities continue to be installed in the west, we expect inventories to climb further.”
Barclays said aluminum’s fundamentals “offer the most bearish outlook for all the base metals,” according to an October 22 report from analysts Gayle Berry, Sijin Cheng and Nicholas Snowdon.
The increased inventories may force smelters around the world to cut output further. Alcoa said in January it was reducing capacity 12 percent. Rio Tinto Group said in November it would close the Lynemouth smelter in Britain. The lightweight metal is used to make autos and consumer appliances.
The survey results from both companies, which tally holdings in the three cities in the Yangtze River Delta as well as Guangdong province in the south, include metal monitored by the Shanghai Futures Exchange. Those holdings have more than doubled to 434,363 tonnes this year, the highest level since January 2011, according to Oct. 19 data from the bourse.
Aluminum stockpiles in China probably won’t decline in the next few months as demand “isn’t great,” Yang Xiaowu, a senior economist at Aluminum Corp. of China, said. Inventories may be about 900,000 tonnes, he said.
Reserves in LME-registered warehouses — none of which is located in China — have expanded 1.8 percent this year to 5.06 million tonnes, according to data from the bourse, with 13 percent held in Asia. The holdings reached a record 5.13 million tonnes in February. China accounted for 42 percent of global aluminum demand last year, according to Bloomberg Industries research.
Output in China climbed 11 percent to 14.77 million tonnes in the first nine months from a year ago, according to the National Bureau of Statistics, while CRU International Ltd forecast demand growth may slow to 7.5 percent this year. Production in Xinjiang, a western region, was a record 104,282 tonnes in August, according to Beijing Antaike Information Development Co. That compares with 311,910 tonnes in Henan, the biggest producer.
WP-BLOOMBERG
