Active trading in East China as spot discounts narrow significantly: SMM

This morning, the SHFE aluminium front-month contract fluctuated. On the fundamentals, aluminium ingot social inventory shifted to an inventory buildup, while inventory in Wuxi continued to decline. Market buying sentiment improved, spot discounts narrowed, and trading was active. Specifically, trading in east China was robust, mainly due to the ongoing inventory reduction in Wuxi, coupled with insufficient arrivals in northwest China, leading to tight market supply.

Traders were purchasing to fulfil long-term contracts, and downstream stockpiling demand remained, driving spot discounts to narrow. Today, SMM A00 aluminium recorded a discount of RMB 50 per tonne against the SHFE 2502 contract, up RMB 10 per tonne from the previous trading day. SMM A00 aluminium ingot was priced at RMB 20,320 per tonne, up RMB 60 per tonne from the previous trading day. In the central China market, downstream buying sentiment weakened as the Chinese New Year break approached. Some enterprises took the opportunity for technological transformation, reducing their purchasing willingness. Traders accelerated shipments, leading to an expansion in discounts in the central China market.

Today, the Henan-Shanghai price spread showed a discount of around RMB 140 per tonne. SMM Central China A00 aluminium recorded RMB 20,180 per tonne against the SHFE 2502 contract, up RMB 60 per tonne from the previous trading day. Actual market transactions were mainly at SMM Central China RMB -20 to -10 per tonne. Regarding inventory, according to SMM's daily aluminium ingot inventory data for three domestic regions, as of January 21, inventory increased by 100 tonnes to 318,400 tonnes.

In the short term, earlier in-transit cargoes gradually entered warehouses, coupled with downstream entering the Chinese New Year holiday, marking a turning point in social inventory. However, the continuous inventory reduction in Wuxi supported regional premiums and discounts. Future attention should focus on arrivals in east China and changes in downstream demand. 

Source: SMM