[SMM Analysis] Why does the spot water rise of East China aluminum ingots narrow by nearly 100 yuan in three days?

SMM 2020/7/7:

According to SMM tracking the spot trading of aluminum ingots in the eastern China market, it is found that the rising water of spot transaction prices has narrowed significantly in the past two days.

Last Friday (July 3) the spot price of aluminum ingots in Shanghai was between 14390 and 14410 yuan / ton, while the price in Wuxi was between 14410 and 14430 yuan / ton, and the spot discount to futures rose between 140 yuan / ton. Although the spot absolute price has fluctuated in a narrow range since this week, there has been no sharp rise and fall, but the rising water has fallen from more than 100 yuan in the previous period to near Pingshui this afternoon (July 7). Why is the spot price cut by nearly 100 yuan in three days?

Source: SMM

From the supply side, as aluminum prices gradually rise, or even hit new highs this year, some smelters, such as Mengtai, Xinfa, and Hope, are more willing to ship goods, and their inventory continues to decrease, and shipments increase. To a certain extent, the rebound of rising water is restrained, and because the Hu / Lun ratio has been maintained at a high level of more than 8 for a long time, imported aluminum ingots continue to flow in. Recently, the circulation of foreign aluminum ingots such as Qili of Malaysia, Vedanta of India and Rusal has increased significantly, and imported aluminum ingots have increased spot supply in the market, driving down market transaction prices and spot prices. From the point of view of the demand side, after entering July, the new orders of downstream aluminum plants decreased significantly compared with the previous period. Under the background of high aluminum prices, the willingness to receive goods downstream is lower than that of the previous period, and the wait-and-see mood is strong, mainly to prepare goods on demand.

While the margin of supply and demand weakens to suppress the rising water to fall, as stocks continue to go to the warehouse and maintain a relatively low level, the futures 07 contract trend is strong, and the price difference between Yuanyue 08 contract and Yuanyue 08 contract widened from 200 yuan / ton last week to 300 yuan / ton this week. under the background of the widening monthly difference, the market consumption heat has not increased, and it is reasonable for the spot to rise and fall.

Taking into account the current weakening trend of supply and demand, it is difficult to rebound in the short term, and the contract is approaching delivery that month, it is expected to maintain a discount of 100 yuan / ton to flat water before delivery. SMM will also continue to monitor trading in the spot market for aluminum ingots. (SMM Xu Man 021 Mel 51595898)