Insufficient Support for Aluminum Semis Consumption, Spot Premiums Under Pressure [SMM Spot Aluminum Midday Review]

SMM News on May 27:

In the morning session today, the center of SHFE aluminum's front-month contract dropped significantly, once breaking below the 20,000 yuan/mt threshold. In east China, as inventory has continued to destock recently, suppliers generally showed strong reluctance to budge on prices. However, downstream buying interest overall showed a weakening trend, with the market trading at a premium of 10 yuan/mt against SMM transactions, and transactions gradually becoming sluggish. Subsequently, as downstream consumption continued to weaken, spot premiums will come under pressure to fall. Today, SMM A00 aluminum was quoted at 20,200 yuan/mt, down 150 yuan/mt from the previous trading day, with a premium of 90 yuan/mt against the June contract, unchanged from the previous trading day. In the central China market, in the morning session, suppliers held prices at a premium of around 10 yuan/mt. Later, as shipments increased but buying interest weakened further, market transactions slipped to a discount of 10 yuan/mt to parity against SMM transactions in central China. Currently, consumption in central China is showing a weakening trend, with downstream purchasing power continuing to decline and destocking slowing down. Similarly, premiums in central China will come under pressure. SMM A00 aluminum in central China was recorded at 20,120 yuan/mt against the SHFE aluminum 2506 contract, down 150 yuan/mt from the previous trading day. The price spread between Henan and Shanghai was -80 yuan/mt, unchanged from the previous trading day, with a premium of 10 yuan/mt against the 2506 contract.

On the inventory side, on May 27, the inventory of aluminum ingots across three domestic regions was 414,000 mt, an increase of 1,000 mt. The daily destocking of inventory across the three regions slowed down again, indicating that weak downstream consumption has already had an impact. The earlier destocking of aluminum ingots was mainly due to reduced inflows + resilient consumption. As consumption gradually enters the off-season, spot premiums will gradually come under pressure and weaken.

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