Destocking Drives Futures Market to Rise Rapidly, While Downstream Hesitates to Purchase Due to High Prices [SMM Spot Aluminum Midday Review]

SMM, February 28 - In the early trading session, SHFE aluminum front-month contract surged rapidly, mainly driven by destocking of aluminum ingot inventory in major domestic consumption regions, which boosted confidence among bulls. However, activity in the spot market weakened. Specifically, in east China, downstream buyers adopted a wait-and-see sentiment again, and spot discounts widened by 10 yuan/mt compared to the previous trading day. Today, SMM A00 aluminum ingot was at a discount of 50 yuan/mt against the SHFE 2503 contract, with SMM A00 aluminum ingot prices recorded at 20,800 yuan/mt, up 250 yuan/mt from the previous trading day. In the central China market, transactions were centered around a range of 10 yuan/mt below the Zhongyuan price to parity. After the sharp rise in aluminum prices, suppliers actively liquidated their positions through arbitrage between spot and futures, increasing their willingness to sell, which further widened the market discounts. Meanwhile, downstream enterprises mainly remained on the sidelines, leading to weaker trading activity. If aluminum prices remain at high levels, spot market discounts may expand further. Today, the price spread between Henan and Shanghai stood at a discount of around 120 yuan/mt. SMM Zhongyuan A00 aluminum ingot was recorded at 20,680 yuan/mt against the SHFE 2503 contract, up 230 yuan/mt from the previous trading day. In terms of inventory, according to SMM data, domestic social inventory of aluminum ingots in major consumption regions stood at 871,000 mt as of March 6, down 15,000 mt from Monday. While destocking has begun to emerge, high absolute prices have deterred downstream buyers from purchasing, leaving spot premiums and discounts with limited upward momentum. It is expected that the market may fluctuate relatively stable with a weak trend next week. Data source: SMM 》Subscribe to view historical SMM metal spot prices