Spot Aluminum Prices Rise for Three Consecutive Days, Downstream Purchasing Power Weakens, Discounts Widen [SMM Spot Aluminum Midday Review]

SMM December 5 News:

In the morning session, SHFE aluminum 12 contract continued to fluctuate upward. The absolute price rose further, with a bleak market in east China. High absolute prices led smelters to actively sell, resulting in ample supply in the market. However, downstream buyers were cautious, with some offering quotes at discounts of 30 to 20 yuan/mt against the SMM average. Traders' purchases at discounts increased slightly, with actual transaction prices hovering around 20 to 10 yuan/mt discount against the SMM average. Today, the east China market's selling sentiment index was 2.7, down 0.04 MoM; the purchasing sentiment index was 2.62, down 0.03 MoM. SMM A00 aluminum closed at 22,090 yuan/mt, up 70 yuan/mt from the previous trading day, at a discount of 80 yuan/mt against the 12 contract, down 20 yuan/mt from the previous trading day.

As aluminum prices strengthened, traders' purchasing sentiment weakened, mostly for hedging purposes, leading to a relatively cold market. Holders were optimistic about prices, showing high selling sentiment, but the market cooled with low trading volume. Ultimately, the actual transaction price in the central China market ranged from parity to a 30 yuan/mt discount against the central China price. Today, the central China market's selling sentiment index was 2.89, down 0.08 MoM; the purchasing sentiment index was 2.77, down 0.05 MoM. SMM central China closed at 21,940 yuan/mt, up 50 yuan/mt from the previous trading day, at a discount of 230 yuan/mt against the 12 contract, down 40 yuan/mt from the previous trading day. The price spread between central China and SHFE was -150 yuan/mt, down 20 yuan/mt from the previous trading day.

Regarding inventory, the total aluminum ingot inventory in major consumption areas on Friday was 437,000 mt, down 8,000 mt MoM. Inventory performance was relatively good, but due to seasonal factors, transportation of aluminum ingots from Xinjiang was hindered, leading to an expected buildup of inventory there. In the short term, as the off-season deepens, casting ingot rates will increase, and demand will weaken marginally. High absolute prices have reduced downstream purchase willingness. Coupled with holders' active year-end sales for cash flow, spot premiums and discounts are expected to be under pressure.