The spot aluminum market is sluggish, with weak trading sentiment. [SMM Aluminum Spot Market Midday Review]

SMM December 25:

The SHFE aluminum 2601 contract fluctuated upward in the morning session, but its overall price center edged down slightly compared to yesterday. Trading sentiment in the east China market was weak, with some enterprises suspending quotations and sales. The mainstream transaction prices were mainly at a discount of 10 yuan/mt to parity against the SMM average price. Approaching year-end, both selling and purchasing sentiment in the market continued to weaken. Today, the selling sentiment index in the east China market was 2.33, down 0.05 WoW; the buying sentiment index was 2.35, up 0.01 WoW. The SMM A00 aluminum price was quoted at 21,980 yuan/mt, down 50 yuan/mt from the previous trading day, at a discount of 170 yuan/mt against the 2601 contract, unchanged from the previous session.

In the central China market, selling continued to weaken, with holders inclined to hold prices firm and sell after premiums/discounts rebound. Environmental protection-driven production restrictions in central China eased somewhat, prompting downstream processing enterprises to make small purchases, which led to a slight rebound in buying sentiment. However, logistics remained constrained by environmental protection measures, resulting in low trading volume. Ultimately, actual transaction prices ranged from a discount of 10 yuan to a premium of 20 yuan against the central China price. Today, the selling sentiment index in the central China market was 2.75, down 0.02 WoW; the buying sentiment index was 2.29, up 0.04 WoW. The SMM central China aluminum price closed at 21,820 yuan/mt, down 50 yuan/mt from the previous trading day, at a discount of 330 yuan/mt against the 2601 contract, unchanged from the previous session; the Henan-Shanghai price spread was -160 yuan/mt, also remaining stable.

Inventory side, aluminum ingot inventories in major consumption areas fell by 2,000 mt WoW on Thursday. Regional performance diverged: Wuxi and Gongyi still saw inventory buildup, while Foshan showed destocking, primarily influenced by price spreads, which led to reduced warehouse inflows in the latter. Comparing the profitability of shipping from Xinjiang to South China versus East China, profits for shipments to South China were lower, causing some cargo originally destined for South China to continue shifting to East China. In the short term, high aluminum prices may continue to suppress end-use demand, posing a risk of inventory buildup for aluminum ingots, and expectations for spot premiums/discounts to remain under pressure in the near term are unchanged.