In the final three trading days before the National Day holiday, the South China spot market stayed soft: aluminum prices continued to edge lower, the SHFE aluminum backwardation structure strengthened, and premiums over the next-month and far-month contracts were actually elevated. Ahead of the holiday, the willingness to cash out at the high basis was strong, and amid ongoing destocking, discount-priced cargoes still dominated spot circulation; demand was largely subdued, with only localized bargain-hunting replenishment and quite limited buying interest. On the whole, however, the high spot premium for aluminum ingots in South China remained largely intact. As of September 30, the SMM A00 aluminum (Foshan) spot premium over the 2610 contract stood at RMB 260/mt, still within the upper range of the year. The Guangdong–Shanghai and Guangdong–Henan spreads were RMB 220/mt and RMB 320/mt, respectively.
The robust performance of the South China basis this round was the joint result of structural tightening on the supply side and concentrated pre-holiday restocking. On the one hand, with aluminum processing capacity in the Southwest coming online progressively and the share of molten aluminum directly supplied by electrolytic smelters staying elevated, ingot casting has been continuously curtailed, and the total volume of ingots available for delivery to South China warehouses has correspondingly shrunk. SMM data show that the national molten-aluminum ratio stood at 78.2% in September, with ingot casting volume down 6.2% year on year, keeping spot supply in a tight balance. On the other hand, with the Mid-Autumn Festival and the National Day holiday approaching, downstream processors concentrated on pre-holiday restocking, procurement picked up in stages, and warehouse withdrawals provided direct support to the high premium. With supply and demand reinforcing each other, the "liquidity premium" has become the defining feature of current South China aluminum ingot pricing.
Inventory is the core variable determining the trajectory of spot premiums and discounts. The absolute level of South China aluminum ingot inventories is currently at a multi-year low for the corresponding period, and even with holiday accumulation, the base remains low. SMM expects Foshan inventories to build by around 25,000–28,000 mt over the holiday, a limited increase that will exert relatively modest downward pressure on the high premium. Two sources of pressure warrant attention after the holiday: first, some downstream processors are likely to resume operations at a slow pace, leaving a time lag in post-holiday demand recovery; second, the inter-regional cargo-transfer window remains open, and expectations of continued inflows of external cargoes will intermittently weigh on South China's high premium, with spot-futures traders cashing out at elevated levels likely to drag the premium modestly lower.
On balance, the South China A00 aluminum ingot premium is likely to ease modestly from its highs after the National Day holiday. However, underpinned by the rigid support of low inventories and the SHFE aluminum backwardation structure, even if the premium over the current-month contract recedes, the actual premium over the next-month contract will not decline significantly. Overall, the premium is expected to move in a pattern of "high-level oscillation with gradual convergence," and it is unlikely to quickly revert to the deep discount structure seen in South China during the same period in previous years.
