Year-End Trading Weakness, Spot Discounts Widen [SMM Spot Aluminum Midday Review]

SMM December 29:

The SHFE aluminum 2601 contract performed strongly in the morning session, with prices rising overall and the price center significantly higher than the previous trading day. Trading sentiment in the east China market weakened overall, primarily affected by year-end enterprise settlement and account closing, leading to generally low market liquidity. Coupled with the rise in SHFE aluminum prices, the mainstream transaction discount widened further. Today, the mainstream transaction prices were mainly in the range of a discount of 20 yuan/mt to a discount of 10 yuan/mt against the SMM average price. The east China market selling sentiment index was 2.13 today, down 0.09 WoW; the buying sentiment index was 2.20, down 0.19 WoW. The SMM A00 aluminum price was quoted at 22,490 yuan/mt, up 470 yuan/mt from the previous trading day, at a discount of 200 yuan/mt against the 2601 contract, down 10 yuan/mt from the previous trading day.

Trading in the central China market continued to weaken today, as the impact of environmental protection-driven production restrictions intensified. Most downstream processing enterprises fully halted production and stopped raw material procurement, with aluminum ingot circulation occurring only among traders. Combined with high aluminum prices, overall procurement sentiment in the market was weak. The final actual transaction prices hovered between a discount of 10 yuan and a discount of 40 yuan against the central China price. The central China market selling sentiment index was 2.73 today, up 0.02 WoW; the buying sentiment index was 1.37, down 0.61 WoW. The SMM central China aluminum price closed at 22,300 yuan/mt, up 450 yuan/mt from the previous trading day, at a discount of 390 yuan/mt against the 2601 contract, down 30 yuan/mt from the previous trading day; the Henan-Shanghai price spread was -190 yuan/mt, down 20 yuan/mt from the previous trading day.

Inventory side, aluminum ingot inventories in major consumption areas increased by 24,000 mt WoW on Friday. Regional performance diverged, with Wuxi and Gongyi experiencing significant inventory buildup, while Guangdong showed destocking. Overall warehouse withdrawals were low, influenced by increased warehouse inflows in Wuxi and Gongyi, leading to inventory accumulation in these two locations. Affected by regional price spreads, warehouse inflows in Foshan decreased, resulting in lower local inventory. In the short term, high aluminum prices may continue to suppress end-use demand, aluminum ingots still face inventory buildup risks, and spot premiums/discounts are expected to remain under pressure.