Spot-Futures Price Spread Boosts Purchases, Regional Sentiment Diverges [SMM Spot Aluminum Midday Review]

SMM January 7 News:

The SHFE aluminum 2601 contract continued to rise in the morning session, with the price center moving higher compared to the previous trading day. Due to the low spot-futures price spread, overall downstream purchasing sentiment was high, and trading conditions improved. Today, mainstream transaction prices were mainly in the range of parity to a premium of 20 yuan/mt against the SMM average price. The east China market selling sentiment index was 2.5, up 0.23 MoM; the buying sentiment index was 2.77, up 0.38 MoM. SMM A00 aluminum was quoted at 24,140 yuan/mt, up 230 yuan/mt from the previous trading day, at a discount of 200 yuan/mt against the 2601 contract, narrowing by 20 yuan/mt from the previous trading day.

Trading sentiment in the central China market recovered today. Major holders consistently held back from selling, leading to limited spot aluminum availability in the market. Downstream processing enterprises maintained minimal or suspended purchases due to high absolute prices. However, traders actively raised prices to purchase for hedging purposes, driving prices continuously higher, though trading volume remained low. Ultimately, actual transaction prices in the central China market climbed from a discount of 10 yuan/mt against the central China price before the opening to a premium of 30 yuan/mt. The central China market selling sentiment index was 2.48, down 0.01 MoM; the buying sentiment index was 2.07, up 0.03 MoM. SMM central China aluminum price closed at 23,930 yuan/mt, up 250 yuan/mt from the previous trading day, at a discount of 410 yuan/mt against the 2601 contract, up 30 yuan/mt from the previous trading day; the Henan-Shanghai price spread was -210 yuan/mt, widening by 20 yuan/mt from the previous trading day.

Inventory side, aluminum ingot inventory in major consumption areas increased by 2,000 mt WoW on Wednesday. Both Gongyi and Wuxi regions showed inventory buildup trends, while Guangdong experienced 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.