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Japan Q3 aluminum premium falls to 3-year low at $79/mt

Singapore — S&P Global Platts assessed the third-quarter premium for imported primary aluminum at $79/mt plus London Metal Exchange cash, CIF main Japanese ports, on July 13, down from $82/mt for Q2.

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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 Q3 assessment was on the basis of at least five confirmed settlements at $79/mt plus LME cash CIF Japan for seaborne P1020/P1020A ingot for loading over July to September, for a volume at least 500 mt/month.

Several Japanese traders confirmed they have settled term contracts with Western producers from July 2-6 at $79/mt premium level, with at least five deals volume is above 500 mt/month and at least one deal volume is below 500 mt/month.

One Q3 deal reported done at $80/mt premium on July 8 with at least 1,000 mt/month. The buyer has port options to Japan and other parts of Asia.

Another Q3 deal was reported done at $85/mt on June 2 under annual negotiation, with 500-1,000 mt/month.

The Q3 premium was the lowest since Q4 2016's $75/mt.

Producers' initial offer was heard at $85/mt while bids were improved from $65-$75/mt in the very beginning.

Aluminum demand in Japan fell significantly this year due to COVID-19, automotive producers have to cut production on slower sales.

Some buyers have cancelled or reduced Q3 term contract on accumulating inventory, and domestic tenders were concluded at $50-$60/mt levels.

Meanwhile, end-users were heard offering Q3 cargoes in the spot market, in a bid to reduce inventory and relief cash flow pressure.

Before the conclusion of the term deals, a total of 3,000 mt/month spot Q3 strips loading over July-Sep were reported concluded at $68/mt in June, and 500 mt/month spot Q3 strips were reported done at $60/mt premium.

As Japan is not short of metals at the moment, with one trader saying that spot offers have to be low in order for them to have any interest.

On the other hand, strong aluminum demand from China have led producers keep offering levels firm. Several producers were heard have sold July delivery cargoes at above $110/mt premium to Chinese buyers.

Producers have showed reluctant to reduce offers by much due to higher premium out of Japan, and they prefer to sell more tonnages to other Asia buyers.

Some Japanese buyers worried that Chinese buying may push up premium across Asia, and improved bids in the end of June.

Platts assessed the spot Japanese import premium unchanged at $68-$78/mt plus London Metal Exchange cash, CIF Japan, on Monday.