LONDON, Jan 25 (Reuters) – China is awash with aluminium. “Illegal” capacity has been closed and smelters in the region around Beijing are, to varying extents, curtailing output to comply with the winter environmental restrictions.
But stocks registered with the Shanghai Futures Exchange (ShFE) continue to build. They surged by 653,411 tonnes last year and were up another 30,000 tonnes at a fresh record high of 783,759 tonnes as of last Friday.
U.S. producer Alcoa told analysts on its Q1 conference call it is forecasting a 1.5-1.7 million tonne surplus in China this year, notwithstanding Beijing’s efforts to restrain capacity. It is also forecasting a bigger deficit of 2.0-2.2 million tonnes in the rest of the world, where visible stocks have been falling for many months.
Inventory registered with the London Metal Exchange (LME) is close to multi-year lows at just 840,000 tonnes, discounting metal awaiting physical load-out.
Unsurprisingly, given such dynamics, the aluminium price in London has been outperforming that in Shanghai.