CIF Japan Q3 aluminum premium rises to $185/mt

S&P Global Platts assessed the third-quarter premium for imported primary aluminum at $185/mt plus London Metal Exchange cash, CIF main Japanese ports, on June 9, up 24.58% from $148-$149/mt for Q2. The increase marks the fourth consecutive quarter of price increases, from a previous $79/mt for Q3 2020 MJP assessed on July 13, 2020, or a 134.18% rise year-on-year in looking at quarterly settlements.

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 Q3 assessment was on the basis of twenty concluded settlements at $185/mt plus LME cash CIF Japan for seaborne P1020/P1020A ingot for loading over July to September, concluded between June 1-8. There were also two settlements at $172/mt and one at $169/mt, which were reported done between May 31 and June 3. These were not deemed repeatable by the close of negotiations, where the remaining trades reported all settled at $185/mt. Total volumes reported by the market summed up to a minimum of 18,300 mt/month.

Four deals, three of which were concluded at $185/mt and one which was concluded at $200/mt respectively for fewer than 500 mt/month, were excluded from the Q3 assessment as the four trades did not fulfill Platts' minimum volume requirement of 500 mt/month for its quarterly assessment. While the four deals were part of strip cargoes, all other deals reported were part of annual frame contracts. Deals were reported over May 31 to June 8.

Despite previous concerns heard in the market that this quarter's Q3 negotiations might be protracted, all of the Q3 trades heard were reported to Platts within two weeks of the earliest one on May 31, with the last trades reported on June 8. Many sources suggested that any further prolongation in negotiations might have seen Q3 trades increasing beyond $185/mt, especially in considering that offer levels from producers were heard ranging between $185-200/mt.

The stronger Q3 premium over that seen in Q2 was attributed by many to a convergence of multiple factors including the rise in premiums in both North America and Europe, higher offer levels heard from producers in a "seller's market" where Japanese consumers require fresh metal, hence disqualifying potentially more inexpensive cargoes from warehouses, as well as prevailing tight shipping and supply conditions, with consistently high freight rates seen in the market. In addition, market sources also noted that while the Chinese import arbitrage window had been closed for the entire duration of the two weeks of Q3 negotiations, its previously open status prior to actual settlement conclusions could have served as leverage in allowing producers and international sellers alike to set initial offers at a high bar, in setting the overall stage and tone for more bullish Q3 sentiments.

Meanwhile, Platts assessed the spot Japanese import premium unchanged at $172-$182/mt plus London Metal Exchange cash, CIF Japan, on June 9 on tight supply and shipping conditions amid higher regional spot premiums. A spot trade was heard concluded at $175/mt CIF Japan for a volume of 500 mt for July loading and July QP on June 9, and was reported by an international trader.