Supply tightens in east China, spot premiums continue to rise [SMM Spot Aluminum Midday Review]

SMM reported on May 16:

In the morning session today, the center of SHFE aluminum prices fell to oscillate around the 20,200 yuan/mt level. In east China, as inventory levels have continued to decline recently, suppliers generally have a strong sentiment to stand firm on quotes. Additionally, major players are purchasing at premiums against the market, causing market premiums to continue rising, mainly at premiums of 10-20 yuan/mt against SMM transaction prices. Today, SMM A00 aluminum was quoted at 20,270 yuan/mt, down 80 yuan/mt from the previous trading day, with a premium of 70 yuan/mt against the 06 contract, up 20 yuan/mt from the previous trading day.

In the central China market, the center of aluminum prices moved higher, and suppliers' profits increased significantly. Most suppliers, aiming to realize monthly order profits, continued to face a price collapse in spot premiums and discounts, with discounts of 10-20 yuan/mt against SMM central China transaction prices. SMM A00 aluminum in central China was recorded at 20,200 yuan/mt against the SHFE aluminum 2506 contract, down 90 yuan/mt from the previous trading day. The price spread between Henan and Shanghai was -70 yuan/mt, and it was on par with the 2506 contract.

On the inventory side, as of May 16, the domestic daily inventory of aluminum ingots across three regions was 459,000 mt, a decrease of 3,000 mt. Currently, due to varying premiums in different regions, issues such as some cross-regional arbitrage sources and tight aluminum scrap supplies have led to tighter supply and demand in some areas, with premiums temporarily remaining high. However, as aluminum prices continue to stay at elevated levels, they will inhibit downstream consumption, limiting the upside potential for premiums.

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