Aluminum Ingot Faces Risk of Inventory Buildup, Spot Premiums/Discounts Expected to Remain Under Pressure in the Short Term [SMM Spot Aluminum Midday Review]

SMM December 23:

The SHFE aluminum 2601 contract edged lower in the morning session, with its price center moving down from the previous day. The drop in aluminum prices failed to boost market sentiment in east China, with offers mainly ranging from a discount of 20 yuan/mt to a premium of 10 yuan/mt against the SMM average price, with discounts of 10 yuan/mt being the most concentrated. Approaching year-end, both selling and purchase willingness in the market were weak. Today, the selling sentiment index in the east China market was 2.41, down 0.07 WoW, while the purchase sentiment index was 2.38, down 0.17 WoW. SMM A00 aluminum was quoted at 21,870 yuan/mt, down 60 yuan/mt from the previous trading day, at a discount of 170 yuan/mt against the 2601 contract, flat from the previous day.

Market sentiment in central China was relatively better, with downstream purchase willingness improving, although selling sentiment dropped back slightly. Affected by the decline in aluminum prices, market offers weakened first and then stabilized, with final transaction prices ranging from a discount of 40 yuan/mt to parity against the central China price. Today, the selling sentiment index in the central China market was 2.75, down 0.02 WoW, while the purchase sentiment index was 2.43, up 0.14 WoW. SMM central China aluminum price closed at 21,710 yuan/mt, down 60 yuan/mt from the previous trading day, at a discount of 330 yuan/mt against the 2601 contract, flat from the previous day; the Henan-Shanghai price spread was -160 yuan/mt, also remaining stable.

Inventory side, aluminum ingot inventories in major consumption areas increased by 11,500 mt WoW on Tuesday, mainly due to resumed shipments from Xinjiang last week arriving this week, coupled with weaker year-end consumption, leading to the rise in aluminum ingot inventories. In the short term, high aluminum prices may continue to suppress end-use demand, with aluminum ingot inventories facing a buildup risk, and expectations for spot premiums/discounts to remain under pressure in the near term are unchanged.