Affected by high aluminum prices, smelters are cautious in purchasing. [SMM Spot Aluminum Midday Review]

SMM January 6:

The SHFE aluminum 2601 contract rose sharply in the morning session, with the price center moving higher compared to the previous trading day. Due to the resumption of capital flows after year-end closing, overall market trading activity improved. Downstream smelters remained cautious in their purchase willingness amid high aluminum prices, resulting in subdued purchasing sentiment; however, traders showed a recovery in procurement sentiment, with increased enthusiasm for inquiries and transactions. Today, mainstream transaction prices mainly ranged from a discount of 10 yuan/mt to a premium of 10 yuan/mt against the SMM average price. The east China market selling sentiment index was 2.26, up 0.18 WoW; the buying sentiment index was 2.39, up 0.24 WoW. SMM A00 aluminum was quoted at 23,910 yuan/mt, up 600 yuan/mt from the previous trading day, at a discount of 220 yuan/mt against the 2601 contract, flat from the previous day.

Aluminum prices continued their upward trend today. Trading sentiment in the central China market remained sluggish, as high absolute aluminum prices suppressed procurement demand from downstream processing enterprises, which mainly conducted small restocking based on rigid demand. Most market transactions were for traders' hedging purchases, with significant divergence in offers. Final actual transaction prices ranged from a discount of 30 yuan/mt to a premium of 20 yuan/mt against the central China price. The central China market selling sentiment index was 2.50, down 0.01 WoW; the buying sentiment index was 2.04, up 0.08 WoW. SMM central China aluminum price closed at 23,680 yuan/mt, up 600 yuan/mt from the previous trading day, at a discount of 450 yuan/mt against the 2601 contract, flat from the previous day; the Henan-Shanghai price spread was -230 yuan/mt, flat from the previous day.

Inventory side, aluminum ingot inventories in major consumption areas increased by 5,500 mt WoW on Wednesday. Both Gongyi and Wuxi regions showed inventory buildup trends. In the short term, high aluminum prices may continue to suppress end-use demand, and aluminum ingots still face inventory buildup risks. Spot premiums/discounts are expected to remain under pressure.