Market review: Driven by macroeconomic factors, aluminum prices swung on a strong note in May, with spot prices continuing to see a significant discount

During this period (May 13-June 11), the most-traded SHFE aluminum contract fluctuated upwards. The lowest point of the most-traded SHFE aluminum contract during this period was 20,320 yuan/mt, and the monthly high was 21,945 yuan/mt. As of June 11, the most-traded SHFE aluminum contract closed at 20,880 yuan/mt, up 275 yuan/mt on the month, with a drop of 1.33%. During this period, the three-month LME aluminum moved between $2,500~2,800/mt, and as of 15:00 on June 11, it closed at $2,561.5/mt, up $41/mt for the period, with an increase of 1.63%.

SMM data showed that the average SMM A00 spot aluminum price in May 2024 recorded 20,775 yuan/mt, up 2.66% MoM. The spot discounts of SMM A00 aluminum in May recorded -91 yuan/mt, down 39.23% MoM. During May 13-June 11, aluminum prices remained high, with spot aluminum prices staying above 21,000 yuan/mt for about three consecutive weeks. High aluminum prices inhibited downstream buying sentiment, and aluminum ingot inventories increased. The domestic aluminum ingot inventories were higher than the same period last year, with spot prices generally showing a discount. Holders sold at high prices, while downstream dip buying increased. In the context of relatively high aluminum prices, there were more shipments and fewer purchases, leading to widening spot discounts.

In East China, spot aluminium transactions were generally moderate, fluctuating between discounts of 150 yuan/mt and premiums of 10 yuan/mt. Spot discounts only briefly returned to a premium when approaching delivery of futures contract, while on other trading days, transactions remained at a discount. In central China, spot transactions were moderate. After aluminium prices hit a high, downstream purchases decreased, and spot discounts in central China once expanded to 330 yuan/mt. Spot prices in central China fluctuated between discounts of 50-330 yuan/mt. In south China, the supply of ingots increased, leading to a significant increase in inventory. The spot cargo available for sale increased, and the market remained at large spot discounts. Overall trading was average, with spot discounts in Foshan fluctuating between 40-260 yuan/mt.

In June, the aluminum production resumption in Yunnan continues to proceed, the operating aluminum capacity in China continues to increase, and the supply is increasing. Downstream consumption is gradually entering the off-season, and demand is relatively weak. The current aluminum ingot inventories are no longer at the lowest level compared to the same period in the past few years. SHFE aluminum market maintains a contango structure. With high aluminum prices together with inventory pressure, spot discounts may persist in the short term.