Supply adjustment stabilizes the central China market slightly, while overall transactions in east China remain sluggish [SMM spot aluminum noon review]

SMM News on July 3

Today, SHFE aluminum opened at a high and fluctuated in the morning session. As the first trading session neared its end, the futures market pulled back rapidly, closing at 20,870 yuan/mt. The spot market remained sluggish in the morning, with downstream purchase willingness remaining insufficient. In the Gongyi region, the spot discount narrowed due to adjustments in cargo supply, market basis arbitrage, and upstream hold back cargoes, but there was no significant improvement in downstream demand. Specifically, in east China, the market continued to offer SMM -20 to -10 in the morning, with downstream purchase willingness remaining weak overall. Today, the basis narrowed, and trading improved slightly. SMM A00 aluminum was reported at 20,860 yuan/mt today, up 50 yuan/mt from the previous trading day, with a discount of 10 against the July contract, narrowing by 20 yuan/mt from the previous trading day.

In the central China market, the spot discount improved slightly today, mainly due to cargo allocation adjustments, market basis arbitrage, and upstream hold back cargoes. However, there was no improvement in actual downstream demand, which remained low. Today, the spot market traded at SMM central China +10, with the price spread against east China narrowing to -190. SMM central China A00 aluminum was recorded at 20,680 yuan/mt against the SHFE aluminum 2507 contract today, up 70 yuan/mt from the previous trading day. The price spread between Henan and Shanghai was 190 yuan/mt, narrowing by 10 yuan/mt from the previous trading day, with a discount of 190 yuan/mt against the 2507 contract.

On the inventory side, according to SMM's domestic aluminum ingot inventory data, domestic aluminum ingot inventory stood at 474,000 mt on July 3, up 6,000 mt from the previous trading day. In the short term, despite the low aluminum ingot inventory, the increase in casting ingot volume has supplemented the market supply. Additionally, there is a strong fear of high prices in the spot market, poor downstream demand, significant production cuts, and low purchase willingness, leading to spot discount transactions. It is expected that the spot premium will narrow in the short term.

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