Criteria for Determining the Premium for CIF Korea P1020A Imported Aluminum Ingots by Shanghai Metals Market (SMM)
General Principles of SMM Price Assessment Methodology
Shanghai Metals Market (hereinafter referred to as SMM) is a fully independent third-party service provider that does not engage in any substantive transactions. Instead, it maintains close communication with buyers and sellers in the market as an observer or organizer, providing relevant services to the market. Through communication with industry insiders, SMM continuously formulates, reviews, and revises its methodologies, adopting the most common product specifications, trade terms, and conditions in the industry. It places equal importance on normal transactions that meet the specified criteria. SMM reserves the right to exclude any price data deemed unreliable or unrepresentative from its price assessments.
SMM publishes daily spot metal prices (or indices, etc.), including those for the Chinese market and markets outside China, commonly referred to as SMM prices. SMM has established corresponding methodologies for each published SMM price (all of which will be published on SMM's official website, www.smm.cn, for reference). These methodologies outline the methods and procedures for forming and publishing SMM prices, and SMM strictly adheres to these methodologies in forming and publishing its prices.
To align with the actual conditions of the spot market, SMM will make necessary revisions to its price assessment methodologies and announce them on its official website, www.smm.cn, three days prior to their official implementation, unless special circumstances, particularly force majeure events (such as natural disasters, wars, or the bankruptcy of exchanges), necessitate a shorter notice period. For any questions or suggestions regarding SMM prices or their methodologies, please contact SMM's customer service (contact information can be found on SMM's official website, www.smm.cn).
This document outlines the criteria and management methods for determining the premium for CIF Korea P1020A spot aluminum ingots. The purpose of SMM in formulating these criteria is to establish a transparent and verifiable mechanism for determining SMM prices, providing market participants with an important pricing indicator.
The SMM Benchmark Administration Committee also regularly reviews the methodologies and their assessment and publication processes. This committee maintains oversight of SMM's methodologies and compilation processes, ensuring that prices or indices accurately reflect the objective conditions of the physical spot market for the relevant commodities. If the committee identifies any issues, it will promptly address them and propose external consultations and revisions to the ongoing methodologies or processes, thereby enhancing the quality of the prices or indices published by SMM. The committee can only propose revisions to the methodologies and procedures to be adopted for future price or index assessments; it cannot alter prices or indices that have already been published.
2. Formation of SMM's CIF Korea P1020A Spot Premiums
Background: South Korea boasts well-developed electronics, automotive, and aerospace industries, which generate significant demand for aluminum ingots. For instance, in automotive manufacturing, aluminum ingots are used to produce engine blocks, auto body structural components, etc., to achieve vehicle lightweighting, improve fuel economy, and enhance performance. In the electronics industry, aluminum ingots are used to manufacture electronic product casings, heat sinks, etc. However, South Korea's domestic aluminum ingot production cannot meet the demand of these industries, necessitating reliance on imports to bridge the substantial gap. Currently, South Korea has become the largest importer of aluminum ingots in Asia, excluding China. SMM is now introducing CIF Korea aluminum ingot spot premiums for market reference and settlement.
The CIF Korea P1020A spot premiums are formed and published according to this methodology, serving as indicative prices that can be used by both trading parties as a reference for CIF Korea P1020A spot trade settlement. These prices reflect the actual or potentially executable spot transaction price ranges for CIF Korea P1020A spot premiums at the time of publication for each full business day. They will be officially launched on May 9, 2025, and historical prices will be simultaneously available for viewing on the SMM official website (smm.cn).
Definitions: The premium for P1020A aluminum ingot transactions delivered to ports in South Korea (such as Gwangyang, Busan, or Incheon) compared to the LME 3-month forward price plus qp swap.
Sources of Raw Data Information
2.1 Price Collection from Price Submitters
2.1.1 Requirements for Smelters
Smelters should have a standardized sales model, smooth sales channels, relatively stable sales volumes, a certain level of influence and reputation, operate lawfully and in good faith, and enjoy a positive market reputation.
They should be able to objectively and truthfully report their actual production and sales situations, including production volumes, operating rates, product quality, selling prices, sales volumes, sales destinations, and product inventories, and maintain good communication with SMM price analysts in this regard.
They should have a certain level of research, judgment, and expectations regarding the macroeconomic situation and the aluminum spot market transactions, and maintain good communication with SMM price analysts in this regard.
2.1.1.1 Requirements for Traders
Traders should have been engaged in aluminum ingot spot trade for more than one year, with an average annual purchase and sales volume of over 50,000 mt on a unilateral basis. They should have a standardized purchase and sales model, smooth purchase and sales channels, relatively stable purchase and sales volumes, a certain level of influence and reputation, operate lawfully and in good faith, and enjoy a positive market reputation.
They should be able to objectively and truthfully report their actual aluminum purchase and sales situations, including product quality, purchase and sales prices, purchase and sales volumes, procurement sources and sales destinations, and product inventories, and maintain good communication with SMM price analysts in this regard.
They should have a certain level of research, judgment, and expectations regarding the macroeconomic situation, the current state of the aluminum market industry, and market transactions, and maintain good communication with SMM price analysts in this regard.
Requirements for Downstream Enterprises
Downstream enterprises should be able to objectively and truthfully report their actual procurement situations, including product quality, purchase prices, purchase volumes, procurement sources, and inventories, and maintain good communication with SMM price analysts in this regard.
2.1.2 Methodology for Price Collection
SMM will, in accordance with the agreements with price submitters, have price analysts regularly (between 10:30 AM and 12:00 PM each trading day) collect relevant data information on CIF Korea spot prices from the price collection contacts of price submitters via phone, QQ, WeChat, fax, and email. Price data information submitted after 12:00 PM will not be used as the basis for daily price assessments. Incomplete data lacking the required minimum information details, even if submitted before the deadline, will not be included. This price data information may include prices for transactions already concluded on the day, the most likely expected prices for pending transactions, offers, counteroffers, etc. The frequency of price collection will be determined based on the trade volumes and frequencies of different price submitters. Prices will not be collected from all contracted parties every day, but contact will be maintained at least twice a week.
2.2.1 CIF Korea P1020A
The minimum standard requires two types of aluminum purity: 99.7% and 99.85% (with a maximum of 0.1% Si and 0.2% Fe).
2.2.2 Transaction price/counteroffer/offer, etc.
The quoted price should be the actual transaction, counteroffer, or offer price data of the price submitter itself, or it can be the transaction, counteroffer, or offer price data of other market participants, or the market price range. The unit is US dollars per metric ton ($/mt), with no decimal places.
2.2.3 Quantity
The quantity of a single transaction should be 200 mt or more.
2.2.4 Order delivery cycle
Within four weeks
2.2.5 Payment terms
Payment terms under the negotiated transaction agreement, such as bank telegraphic transfer, letter of credit payment, etc.
2.2.6 Delivery location
Port delivery
2.2.7 Payment methods and terms
Payment methods: LC, DP, TT, cash telegraphic transfer, etc.; Payment terms: Payment should be completed within two working days after the delivery of the B/L.
2.2.8 Pricing unit
US dollars per metric ton ($/mt)
2.2.9 Presentation form
Presented in the form of a range, representing the price in US dollars excluding tax.
2.2.10 Release time
12:00 PM each trading day (excluding Chinese public holidays and weekends)
2.3 Price assessment process
SMM conducts price assessment work from 11:00 AM to 12:00 PM each working day. The specific process is as follows:
2.3.1 Price Release
SMM will formulate prices in accordance with the following standards and regulations and publicly release them on the official SMM website at www.smm.cn.
The release time is 12:00 PM on each trading day of China's legal working days.
The release time may also be affected by various emergencies and force majeure factors, such as power outages and natural disasters. In such cases, SMM will make every effort to promptly inform the market of the delayed price release time.
2.3.2 Revision of Released Prices
After the release of the price, if any errors are discovered, whether due to incorrect operations or calculation errors, SMM will promptly issue a correction announcement and rectify the errors.
2.4 Methodology Changes
All markets are subject to change, and SMM is responsible for ensuring that the methodologies for market reports evolve in tandem with the market. Therefore, SMM will conduct regular internal reviews of the appropriateness of the methodologies based on industry feedback. For all potential substantive but non-urgent modifications, SMM will follow a formal external consultation process. Subsequently, significant changes will be announced with a notice period of at least 28 days, inviting industry participants to provide comments, unless special circumstances, particularly force majeure (natural disasters, wars, exchange bankruptcies, etc.), necessitate a shorter notice period.
For any inquiries, please contact Keria from SMM at 17862899582 or 021-20707848.
