Stocks of aluminium registered with the Shanghai Futures Exchange (ShFE) rose another 6,102 tonnes in the week to Thursday, extending a build that has been running uninterrupted since June last year.
At a current 940,318 tonnes ShFE inventory is at unprecedented levels. The previous high was 504,974 tonnes in March 2013.
The timing of this accelerated accumulation of metal in exchange warehouses is particularly incongruous.
The "winter heating season" with its associated curtailments of aluminium production is only now drawing to a close.
If China's production has fallen, and all the available evidence suggests it has, how come so much aluminium is showing up in the ShFE's warehouse network?
Graphic on Shanghai Futures Exchange prices and stocks:
PRODUCTION DOWN...
Tracking China's production of aluminium is a statistically tortuous exercise but there seems little doubt that national run-rates have dipped over the "winter heating season", which started in November 2017.
The National Bureau of Statistics pegs primary metal production at 5.33 million tonnes over the first two months of this year. That represented a year-on-year decline of 1.8 percent.
February figures from China's Nonferrous Metals Industry Association (CNIA), released via the International Aluminium Institute, are still pending but January's output was down 2.2 percent.
Specialist research house AZ China, meanwhile, estimates production over the first two months of this year fell by 3.7 percent to 5.69 million tonnes.
However, it's increasingly clear that the reality of these winter production cuts hasn't lived up to the hype.
A key development was the permission granted Hongqiao Group to count the 2.67 million tonnes of unauthorised capacity closed in July last year towards its winter curtailment requirements.
It also seems that producers outside of the regions impacted by the winter cuts lifted output, while new capacity has still been coming on stream.
With all those caveats, nevertheless, it seems indisputable that production has been running at below year-earlier levels.
So how come Shanghai stocks have still increased by 274,000 tonnes since the mid-November start of the curtailments?
...STOCKS UP?
A missing part of the aluminium picture in China is the impact of the pollution curtailments on the downstream processing section of the supply chain.
The impact on upstream operations, both alumina and primary producers, has grabbed the headlines.
But the pollution controls affected all industrial plants, including those transforming raw metal into semi-manufactured products.
It would be logical that disruption to this processing trade would have generated surplus metal units, although exactly how much is very difficult to say.
Two other factors may have combined to drive both new surplus and older stocks into the statistical light of exchange warehousing.
The net impact of the winter cuts may have disappointed aluminium bulls on the London Metal Exchange (LME) but the same holds true of speculators on the Shanghai Futures Exchange.
The ShFE price, basis the most traded contract, hit a five-year high of 17,165 yuan per tonne in September, accompanied by surging volumes and open interest, hallmarks of China's speculative masses on the move.
That futures price spike, according to AZ China's Paul Adkins, opened up a gap with physical prices in the domestic market, incentivising the movement of stocks to exchange warehouses.
The heightened volatility of ShFE prices last year, as the market tried to price in first the closure of "illegal" capacity and the winter curtailment, may also have caused a collective flight to the safety of exchange storage.
This process has likely been accelerated by a continuing clampdown on credit in parts of the Chinese economy, particularly the shadow financial sector.
The combination of push from higher risks financing inventory and pull from physical-futures arbitrage has meant a shift in where inventory is stored.
The massive build in exchange stocks, in other words, may seem a reflection of current supply-demand dynamics but may rather reflect previously "hidden" inventory moving from the statistical opacity of off-exchange storage to on-exchange storage.
It's worth remembering that a very similar mix of fundamental, financial and credit drivers caused LME aluminium stocks to balloon in the aftermath of the Global Financial Crisis.
PRICE TRUMPS POLICY
How much further will ShFE stocks build?
The answer must lie in China's internal aluminium market dynamics.
These are currently highly fluid.
There is speculation that Beijing's war on smog may lead to more extensive curtailments of heavy industry, including aluminium smelters, in the months ahead.
Beijing is also pressing ahead with its "old for new" capacity policy as a way of braking growth in the aluminium smelter sector.
And then there are the U.S. tariffs on imports of aluminium which have just kicked in, even if the immediate consequences for China look marginal.
However, policy in both China and the United States will play second fiddle to price.
The Shanghai aluminium price has collapsed from those September peaks and is currently trading just below 14,000 yuan per tonne.
New smelter projects are consequently being delayed and AZ China's estimate is that "only" around 775,000 tonnes of new capacity has entered the market since the beginning of 2017.
"We have adjusted our 2018 production forecast to 37.6 million tonnes, an increase of 2.4 percent over 2017, but a reduction of 3 percent compared to our previous forecast," Adkins told Reuters Global Metals Forum on Thursday.
By the standards of China's giant aluminium sector, that's a low growth rate and one that may well be exceeded by demand growth this year, according to Adkins.
The outlook is at the very least for a much reduced domestic market surplus but as the aluminium market has found out to its cost over the last year, there are too many moving parts in the Chinese aluminium equation to instil much confidence in predicting the future.
In the interim Shanghai stocks are still rising and as long as they do, the local price is going to remain under pressure.
And, as sentiment and arbitrage increasingly link the Shanghai and London markets, that's probably not good news for the LME price either.