Spot Discounts in East China Continue to Narrow, Recent Transactions Likely Dominated by Traders [SMM Spot Aluminum Midday Review]

SMM  January 22—

During the early trading session, SHFE aluminum front-month contract fluctuated downward. Fundamentally, outflows from warehouses in Wuxi were relatively strong, stimulating suppliers' sentiment to stand firm on quotes. Currently, as the market gradually enters the holiday period, transactions are mainly concentrated among traders. Trading activity in east China was relatively active. Today, SMM A00 aluminum was at a discount of 30 yuan/mt against the SHFE 2502 contract, narrowing by 20 yuan/mt from the previous trading day. SMM A00 aluminum ingot was recorded at 20,240 yuan/mt, down by 80 yuan/mt from the previous trading day.

In the central China market, north-west cargoes have not yet significantly entered warehouses, and the overall market showed a weak supply and demand situation. After the pullback in the futures market today, suppliers' sentiment to stand firm on quotes strengthened, with actual transactions mainly at parity to a premium of 20 yuan/mt against SMM central China prices. The price spread between Henan and Shanghai was around a discount of 130 yuan/mt. SMM central China A00 aluminum was recorded at 20,110 yuan/mt, down by 70 yuan/mt from the previous trading day.

Regarding inventory, according to SMM's daily aluminum ingot inventory data for three domestic regions, as of January 22, inventory buildup reached 4,600 mt to a total of 323,000 mt. In the short term, earlier in-transit cargoes are gradually entering warehouses, combined with downstream entering the Chinese New Year holiday, leading to a turning point in social inventory. However, continuous destocking in Wuxi provided support for regional premiums and discounts. Moving forward, attention should be paid to arrivals in east China and changes in downstream demand.

Source: SMM

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