Japan Q2 aluminum premium falls to 3-year low at $82/mt

Singapore — S&P Global Platts assessed the second-quarter premium for imported primary aluminum at $82/mt plus London Metal Exchange cash, CIF main Japanese ports, on Wednesday, down from $83/mt for Q1.

Platts specifications are for all quarterly settlements on a CIF main Japanese port basis, negotiated before the quarter between two unaffiliated counterparties, for P1020/P1020A 99.7% primary aluminum ingot, with payment in cash against documents, for volumes of 500 mt/month or more.

The Q2 assessment was on the basis of at least six reported settlements at $82/mt plus LME cash CIF Japan for seaborne P1020/P1020A ingot for loading over January-March, for a volume at least 500 mt/month.

Volumes were fixed for one year by annual term contracts, while premiums are negotiated between sellers and buyers who have signed the contracts usually in November or December in the previous year, sources said.

A Western producer reported five deals bounded by term contracts for a total volume of at least 3,500 mt/month, up to more than 5,000 mt/month.

Several market participants said another Western producer has also concluded term deals at $82/mt over Tuesday to Wednesday. A Japanese trader said total tonnages from several producers added to over 2,000 mt/month.

Bid-ask gap was wide this time. The deal was down from the two producers' initial offers at $105/mt and $82/mt while a major Japanese end user kept bids at $75/mt. Other Japanese traders said they are just followers in the quarterly pricing.

The Q2 premium was the lowest since Q4 2016's $75/mt, while the LME cash settlement closed at $1,489/mt on Tuesday, the lowest since early 2016. It was also the lowest second quarter fixed premium since 2010.

Sources cited excess supply and low demand because of the economic slowdown caused by the coronavirus as major factors weighing on premiums.

Before the conclusion of the term deals, six Q2 strips for multi-cargo supply over April-June were reported closing at $82/mt, against $90/mt offer and $75/mt bid over March 11-23. Total volumes came to 3,000 mt for April, and 3,500 mt/month for May-June.

Several traders and consumers urged producers to follow the number in the strong buyer market as aluminum prices kept sinking.

Platts assessed the spot Japanese import premium unchanged at $66-$76/mt plus London Metal Exchange cash, CIF Japan, on Wednesday. Spot premiums remained steady because of scarce deals, bids and offers.