According to sources with knowledge of the situation, Japanese aluminium buyers and sellers have agreed to a premium of US$127.50 per metric ton above London Metal Exchange aluminium prices in the third quarter, as low demand and sufficient aluminium stocks continue to be the norm.
The opening round of negotiations for the quarter saw producers lead with prices ranging between US$165 and US$180. Buyers were seeking prices in the US$100 to US$110 range, but the sources say negotiations came to an end before they could bring prices to that level.
The final price landed squarely within the US$125 to US$130 range established in the second quarter of the year.
Initially aluminium producers forecast a tighter market due to a drop in imported aluminium ingot and a rise in overseas premiums. However, tepid demand in the automotive and construction sectors, coupled with a significant inventory on hand, caused producers to reassess.
Reuters said that aluminium on hand at the three biggest Japanese ports totaled 357,490 metric tons at the close of June, which was well above the 250 thousand to 300 thousand metric tons that the country’s aluminium warehouses are comfortable with.
Marubeni indicates that imports of aluminium ingot was off by 32 percent in the first half of the year, as imports from Russia specifically fell off by 59 percent. A large portion of Japanese companies have sworn off Russian products after the country’s military invaded Ukraine over a year and a half ago.
Typically pricing talks between aluminium buyers and sellers are completed before the beginning of the quarter in which they are to be in effect, but this is the third quarter in a row in which talks spilled over into the quarter in question. Experts say the cause of the protracted negotiations is due to the significant distance between the two sides at the beginning of the negotiations.
