Spot aluminium premiums continued to expand amid brisk trades

SHANGHAI, Apr 22 (SMM) – Premiums for spot aluminium prices in China over futures continued to expand on Wednesday morning as demand remained strong.

Spot aluminium were quoted at 12,250-12,270 yuan/mt in east China’s Shanghai and Wuxi in morning trade, with premiums of 30-50 yuan/mt over the May contract on the Shanghai Futures Exchange. That was slightly up from 20-40 yuan/mt on Tuesday morning.

Chart 1: A00 aluminium prices and premiums over the SHFE May contract

Source: SMM

With the historic plunge in oil prices roiling global markets, SHFE aluminium slipped along with the nonferrous complex in early morning trade. It, however, clawed back those losses and returned the green, supported by positive fundamentals.

SMM data showed that social inventories of primary aluminium ingots in China dropped more than 100,000 mt last week and are on track for another massive decline.

Meanwhile, south China’s spot aluminium market continued to outperform the eastern one, as premiums of Guangdong spot aluminium prices over Shanghai expanded to 50-60 yuan/mt in morning trade, compared to 40 yuan/mt in the previous day.

Chart 2: Guangdong spot aluminium prices and premiums over Shanghai

Source: SMM

Aside from sharp declines in inventories, firm backwardation on SHFE aluminium also proved that near-term demand for aluminium is robust in China. Price spreads between the SHFE May and June contracts have expanded to 90-100 yuan/mt.