Transaction prices fell, with the risk of inventory buildup still looming. [SMM Spot Aluminum Midday Review]

SMM December 30:

The SHFE aluminum 2601 contract fell in the morning session, with its price center declining significantly from the previous trading day. Aluminum prices dropped today. Buying sentiment in the east China market improved slightly, with some downstream users restocking, but overall transaction sentiment remained low due to year-end settlement and account closing. Mainstream transaction prices mainly ranged from a discount of 10 yuan/mt to parity against the SMM average price. The east China market selling sentiment index was 2.03, down 0.10 WoW; the buying sentiment index was 2.24, up 0.04 WoW. SMM A00 aluminum was offered at 22,180 yuan/mt, down 310 yuan/mt from the previous day, at a discount of 200 yuan/mt against the 2601 contract, flat from the previous day.

Aluminum prices corrected, but end-use demand remained weak. Environmental protection-driven production restrictions intensified, prompting downstream processing enterprises in central China to suspend raw material purchases, leading to sluggish buying sentiment among traders. Overall market transactions were poor, but are expected to improve after processing enterprises gradually resume operations following the New Year holiday. Actual transaction prices in the central China market today ranged from a discount of 30 yuan/mt to parity against the central China price. The central China market selling sentiment index was 2.72, down 0.01 WoW; the buying sentiment index was 1.53, up 0.16 WoW. SMM central China aluminum price closed at 21,970 yuan/mt, down 330 yuan/mt from the previous day, at a discount of 410 yuan/mt against the 2601 contract, down 20 yuan/mt from the previous day; the Henan-Shanghai price spread was -210 yuan/mt, down 20 yuan/mt from the previous day.

Inventory side, aluminum ingot inventories in major consumption areas increased by 1,500 mt WoW on Tuesday. Regional performance diverged, with Guangdong and Gongyi showing inventory buildup, while Wuxi saw slight destocking. 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.