South China A00 aluminium ingot premium expected to ease from highs after national day holiday

In the final three trading days before the National Day holiday, the South China spot market stayed soft: aluminium prices continued to edge lower, the SHFE aluminium backwardation structure strengthened, and premiums over the next-month and far-month contracts were actually elevated. Ahead of the holiday, the willingness to cash out at the high basis was strong, and amid ongoing destocking, discount-priced cargoes still dominated spot circulation; demand was largely subdued, with only localized bargain-hunting replenishment and quite limited buying interest. On the whole, however, the high spot premium for aluminium ingots in South China remained largely intact. As of September 30, the SMM A00 aluminium (Foshan) spot premium over the 2610 contract stood at RMB 260 per tonne, still within the upper range of the year. The Guangdong–Shanghai and Guangdong–Henan spreads were RMB 220 per tonne and RMB 320 per tonne, respectively.

The robust performance of the South China basis this round was the joint result of structural tightening on the supply side and concentrated pre-holiday restocking. On the one hand, with aluminium processing capacity in the Southwest coming online progressively and the share of molten aluminium directly supplied by electrolytic smelters staying elevated, ingot casting has been continuously curtailed, and the total volume of ingots available for delivery to South China warehouses has correspondingly shrunk. SMM data show that the national molten-aluminium ratio stood at 78.2 per cent in September, with ingot casting volume down 6.2% year on year, keeping spot supply in a tight balance. On the other hand, with the Mid-Autumn Festival and the National Day holiday approaching, downstream processors concentrated on pre-holiday restocking, procurement picked up in stages, and warehouse withdrawals provided direct support to the high premium. With supply and demand reinforcing each other, the "liquidity premium" has become the defining feature of current South China aluminium ingot pricing.

Note: This article has been shared by SMM and has been published by AL Circle with its original information without any modifications or edits to the core subject/data.