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[SMM analysis] how big is the space above the Guangdong aluminum base difference for the spot high rising water for the month?
Jul 15,2020 20:23CST
The content below was translated by Tencent automatically for reference.

SMM, July 15:

After the sharp rise and fall in previous trading days, the Shanghai Aluminum 2007 contract finally expired today. Starting from tomorrow, Shanghai Aluminum 2008 will officially become a spot monthly contract, but Guangdong aluminum ingots spot 08 contract with nearly 300 yuan / ton of high water to change the month, does the basis still have the power and space to continue to strengthen?

Before analyzing the basis change, let's take a look at today's data: the stock of aluminum ingots in Guangdong public warehouse is 173500 tons, an increase of about 23000 tons from the low of 150500 tons on June 22nd; the price of imported aluminum ingots in Guangdong is 60 RMB100m / ton cheaper than that of domestic aluminum ingots, and the import window continues to open; after the close of trading in Shanghai, the difference between 2008 / 09 and 2009 / October is close to 300RMB / ton, while the difference in 2009 / October is 165RMB / ton.

The increase in stock in public warehouses means that the supply and demand of aluminum ingots is turning loose, and the low cost of imported aluminum ingots makes some downstream processing enterprises purchase more aluminum ingots to replace domestic aluminum ingots. The strong Back structure of aluminum futures shows that the current spot aluminum ingots are still strong reality and weak expectations. Separately, the main factors of bearish spreads are: weakening demand in the summer off-season, high spot rising water (industrial customers directly do long on futures contracts in recent months rather than buying spot directly); the main factors supporting the basis are: the long single gap between spot traders (this part can not be replaced by imported aluminum ingots for the time being), the bullish psychology of consignors.

Since Shanghai aluminum futures changed to Back structure in mid-April, the spot basis of Guangdong aluminum ingots has been strong at first and then weak, that is, the trend of basis is relatively strong after the change of month, and return gradually until near delivery. However, and 06Compact 07 about 170 yuan / ton and 200 yuan / ton after the initial basis is different, today's 08 contract is a basis of 280yuan / ton (SMM Foshan aluminum price 14760 yuan / ton, corresponding to Shanghai aluminum 2008 about 14480 yuan / ton disk price), and the highest basis of the previous two months of the contract is only 340 yuan / ton, so even if the basis continues to rise in the short term, its space will not be very big.

Taken together, there is a need for a correction in Guangdong's aluminum base margin in the short term, but the spot long order will not fall too much before the month, and then it is more likely to narrow the margin through the rise of futures.

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