Inventory continues to decline, with price spread between futures contracts and premium rising simultaneously [SMM Spot Aluminum Midday Review]

SMM News on June 12: In the morning session today, the center of SHFE aluminum prices continued to break through upwards, rising above the narrow fluctuation range near 20,500 yuan/mt. Cargo availability was tight in east China, with the backwardation structure further widening, and suppliers continued to hold firm on premiums. 1: In-transit cargoes are expected to be limited; 2: The ultra-low inventory levels in the spot market suggest that deliverable cargoes are likely to be tight; 3: Major players are purchasing at high premiums in the market. The market traded at a premium of 30-40 yuan/mt against the SMM average price. Today, SMM A00 aluminum ingot prices were reported at 20,650 yuan/mt, up 250 yuan/mt from the previous trading day, with a premium of 70 yuan/mt against the June contract and a premium of 220 yuan/mt against the July contract.

In the central China market, suppliers followed the price-holding trend in east China in the morning session, with the market trading around a premium of 10 yuan/mt to parity. However, as futures prices rose, downstream buying interest weakened, with offers falling to a discount of 10 yuan/mt against central China. Additionally, after the price difference between primary aluminum and aluminum scrap widened, some downstream players switched to purchasing aluminum scrap, leading to a weakening in the primary aluminum market. SMM central China A00 aluminum was recorded at 20,590 yuan/mt against the SHFE aluminum 2506 contract, up 240 yuan/mt from the previous trading day. The price spread between Henan and Shanghai was -60 yuan/mt, down 10 yuan/mt from the previous trading day, with a premium of 10 yuan/mt against the 2506 contract.

On the inventory side, SMM weekly inventory was recorded at 460,000 mt, down 17,000 mt WoW. It is expected that premiums will remain firm under low inventory conditions. Currently, the Shanghai-Guangdong price spread has widened to 170 yuan/mt, reopening the window for inter-regional arbitrage, and cargoes will be gradually transported to east China by water. According to SMM, cargoes transferred from south China in early June have been arriving in recent days, but the volume is not significant, causing limited impact on the market.

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