Japanese Q4 aluminum premium falls 33% on quarter to $99/mt

Platts, part of S&P Global Commodity Insights, assessed the fourth-quarter premium for imported primary aluminum at $99/mt plus London Metal Exchange cash, CIF main Japanese ports, on Oct. 5, down 33.1% from $148/mt assessed in the third-quarter as market sentiment remained bearish in Japan.

This decrease marks the fourth consecutive decline in Japanese quarterly premiums, reflecting the prevailing weak market fundamentals observed in Japan.

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 under annual frame contracts.

The Q4 assessment was on the basis of at least 13 concluded settlements at $99/mt plus LME cash CIF Japan for seaborne P1020/P1020A ingot for loading over October to December, for a volume of at least 500 mt/month. The 13 concluded deals were reported between Sept. 30 to Oct. 4 after the Platts Market on Close assessment process, and the total volume of these trades amounted to a minimum of 19,500 mt/month.

There were also four settlements reported to have been done at $98/mt between Sept. 26 to Oct. 3. These trades were not deemed repeatable by the close of the negotiations, whereby most of the deals reported in October were concluded at $99/mt. The total volume of the four trades reported added up to a minimum of 11,500 mt/month.

In addition, a deal was reported done at $99/mt Oct. 4, as part of the annual frame contract, for 250-499 mt/month was excluded from the Q4 assessment as the deals did not fulfill S&P Global's minimum volume requirement of 500 mt/month.

The lower Q4 premium was largely attributed to the persistently weak demand for aluminum observed in Japan. Market sentiment had been bearish due to the stream of production cuts announced by Japanese automakers, which was triggered by supply chain issues.

According to market participants, Japanese end-users remain relatively overstocked from the previous quarters, with the record high volume of stocks readily available in Japanese ports a contributing factor to the waning demand for aluminum.

In addition, downstream demand for aluminum in other parts of Asia was similarly muted, with the Chinese import arbitrage window still closed despite a slight improvement in the last week of September. The window has remained closed since October 2021, contributing to the lack of support for premiums in the Asian aluminum market.

Meanwhile, Platts assessed the CIF Japan spot premium for 99.7% P1020/P1020A aluminum ingot at $80-$90/mt plus London Metal Exchange cash, CIF Japan, on Oct. 5, unchanged from Oct. 4.