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China's aluminum slack season begins earlier despite stimulus measures

Singapore — China's aluminum slack season has come earlier this year than last year, despite stimulus measures, amid a bleak market outlook, Chinese sources said Wednesday.

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China Construction Bank in its monthly aluminum report this week said China's downstream aluminum sector has entered the off season earlier on the back of poor economic data. It noted that arid sentiments now prevail and market participants were worried about stock accumulation, as the boom season ended.

The country's 2019 aluminum demand growth was seen to be just 1% due to the lack of demand from the traditional sectors, according to China Nonferrous Metals Industry Association.

Brokerage Jinrui Futures said in its monthly aluminum report said despite the Chinese government having used economic stimulus measures to support demand growth, the impact as of now was not evident. It noted that because of the current slack season, domestic aluminum prices would stay weak and would hardly improve.

The Shanghai Futures Exchange's most active aluminum futures contracts closed at Yuan 46,610/mt ($6,769) Tuesday, down Yuan 650/mt from Monday, SHFE data showed. Prices in January were higher at Yuan 47,650/mt.

State-run metals consultancy Beijing Antaike told an industry seminar in April that a weaker global economy meant limited aluminum demand by the Chinese car and real estate sectors, which, along with the difficulties faced by the Chinese stimulus policy to take effect in the near run, implied a gloomy overall outlook.

China is forecast to add around 1 million mt/year new aluminum output capacity in 2019, on top of the current built national capacity of 40.8 million mt/year, thus adding fuel to the supply pressure, the Antaike data showed.

The Chinese Ministry of Industry and Information Technology told the domestic aluminum sector in May that it would keep capping new aluminum output capacity as domestic aluminum demand has entered a slow speed growth phase now, causing supply surplus risks.

-- Joshua Leung, newsdesk@spglobal.com

-- Edited by Manish Parashar, newsdesk@spglobal.com