Market transactions remain sluggish, spot discounts hit yearly low [SMM Spot Aluminum Midday Review]

SMM December 26:

The SHFE aluminum 2601 contract rose first and then fell in the morning session, with the overall price center moving higher compared to yesterday. Trading sentiment in the east China market recovered WoW from yesterday, but remained constrained by factors such as weakening year-end demand and enterprise settlement and account closing, keeping overall trading activity at a low level. Mainstream transaction prices were mainly concentrated in the range of a discount of 20 yuan/mt to a discount of 10 yuan/mt against the SMM average price. Current high SHFE aluminum prices, coupled with a lack of support from actual year-end demand, pushed spot discounts to their lowest level this year, prompting some downstream enterprises to conduct moderate restocking. Today, the selling sentiment index in the east China market was 2.22, down 0.11 WoW; the purchasing sentiment index was 2.39, up 0.04 WoW. The SMM A00 aluminum price was quoted at 22,020 yuan/mt, up 40 yuan/mt from the previous trading day, at a discount of 190 yuan/mt against the 2601 contract, down 20 yuan/mt from the previous trading day.

Trading in the central China market remained weak, with ongoing environmental protection-driven production restrictions. Downstream enterprises primarily consumed raw material inventories, showing weak purchasing sentiment. Some traders bought the dip, but low premiums/discounts and unrecovered logistics transportation kept holders' willingness to sell low, resulting in limited actual trading volume. Final actual transaction prices hovered between a premium of 10 yuan and a discount of 20 yuan against the central China price. Today, the selling sentiment index in the central China market was 2.71, down 0.04 WoW; the purchasing sentiment index was 1.99, down 0.30 WoW. The SMM central China aluminum price closed at 21,850 yuan/mt, up 30 yuan/mt from the previous trading day, at a discount of 360 yuan/mt against the 2601 contract, down 30 yuan/mt from the previous trading day; the Henan-Shanghai price spread was -170 yuan/mt, down 10 yuan/mt from the previous trading day.

Inventory side, aluminum ingot inventories in major consumption areas increased by 4,000 mt WoW on Friday. Regional performance diverged: Gongyi continued to see inventory buildup mainly due to downstream environmental protection-driven production restrictions, while Foshan and Wuxi showed destocking trends. Shipments from Xinjiang recovered, the period of concentrated arrivals passed, leading to lower warehouse inflows in Wuxi, resulting in an overall daily destocking trend. In the short term, high aluminum prices may continue to suppress end-use demand, aluminum ingots face inventory buildup risks, and expectations for spot premiums/discounts to remain under pressure in the near term are unchanged.