Substantial Retreat in Aluminum Futures and Spot Prices Stimulates Downstream Purchasing Sentiment [SMM Spot Aluminum Midday Review]

SMM, May 7 Report

Today, SHFE aluminum saw a significant pullback in the morning session. Although it rebounded slightly at the opening, it soon entered a continuous decline. The closing price in the first trading session was 260 yuan/mt lower than the opening price. In terms of the spot market performance, the price decline stimulated downstream procurement sentiment, with some traders reporting an increase in downstream procurement volume.

Specifically, in east China, there was an ample supply of spot aluminum, and suppliers were shipping out a large volume. In the morning, sellers offered at a slight discount to SMM and at the average price, with the latter being more common. Downstream buyers, however, preferred lower prices, and transactions were concluded at a price 10 yuan/mt below SMM. Today, SMM A00 aluminum was quoted at 19,610 yuan/mt, a decrease of 240 yuan/mt from the previous trading day. It was trading at a discount of 20 yuan/mt to the May contract, unchanged from the previous trading day.

In the central China market, transactions were moderate today with no obvious trend of change. Most transactions were concluded at the SMM average price. Some suppliers offered at a premium of 10 yuan/mt, mainly due to the fact that the inventory buildup in the Gongyi area after the holiday was lower than expected. The price decline led to an increase in downstream purchases, contributing to a positive outlook for spot premiums. SMM central China A00 aluminum was recorded at 19,560 yuan/mt against the SHFE aluminum 2505 contract, a decrease of 240 yuan/mt from the previous trading day. The price spread between Henan and Shanghai was -50 yuan/mt, unchanged from the previous trading day. Actual market transactions were concluded at parity with the SMM central China price and at a discount of 70 yuan/mt to the 2505 contract.

In terms of inventory, according to SMM's data on aluminum ingot inventories in three domestic regions, the total inventory of domestic aluminum ingots on May 7 was 513,000 mt, an increase of 200 mt from the previous day. In the short term, inventory buildup is expected after the holiday, coupled with the transition between peak and off-peak seasons. Downstream demand is anticipated to weaken, and bearish sentiment has resurfaced. It is expected that the pace of inventory de-stocking will slow down or inventory buildup will continue, with spot discounts being the main form of transactions. Aluminum prices are expected to encounter resistance on the upside.

Data source: SMM

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