SMM January 20 -
In the early trading session today, the SHFE aluminum front-month contract fluctuated, with prices pulling back sharply near the close of the first trading session. On the fundamentals, aluminum ingot social inventory shifted to an inventory buildup, but the continuous destocking in Wuxi stimulated market buying sentiment. Spot discounts narrowed, and transactions were relatively active.
Specifically, trading in east China was robust, mainly due to the ongoing destocking in Wuxi's social inventory, coupled with insufficient arrivals in north-west China, leading to tight market supply. Traders were purchasing for long-term contracts, and downstream stockpiling demand remained, driving the narrowing of spot discounts. Today, the SMM A00 aluminum discount against the SHFE 2502 contract was 60 yuan/mt, up 20 yuan/mt from the previous trading day. The SMM A00 aluminum ingot price was recorded at 20,260 yuan/mt, down 80 yuan/mt from the previous trading day.
In the central China market, downstream buying sentiment weakened, mainly due to the Chinese New Year break period. Some enterprises took the opportunity for technological transformation, reducing their purchasing willingness. Traders accelerated shipments, leading to an expansion of discounts in the central China market. Today, the Henan-Shanghai price spread was around a discount of 140 yuan/mt. The SMM central China A00 aluminum price against the SHFE 2502 contract was recorded at 20,120 yuan/mt, down 100 yuan/mt from the previous trading day. Actual market transactions were mainly at SMM central China -20 to -10 yuan/mt.
Regarding inventory, according to SMM domestic aluminum ingot social inventory data, as of January 20, inventory increased by 15,000 mt to 455,000 mt. In the short term, earlier in-transit cargoes gradually entered warehouses, coupled with downstream entering the Chinese New Year holiday, causing a turning point in social inventory. However, the continuous destocking in Wuxi supported regional premiums and discounts. With downstream entering the holiday and the impact of arrivals, discounts are expected to persist across regions.
Data Source: SMM
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