Japan’s aluminium premium for the fourth quarter shipments decreased 24% to US$97 per metric ton, down from US$127.5 per metric ton in the previous quarter, according to sources close to the pricing discussions. This figure is the lowest since the Q1 of the current year, even though producers were initially hoping for US$110 to US$120 per metric ton.
Japan, being Asia’s leading importer of this light metal, sets a regional benchmark with the premium it pays over the London Metal Exchange (LME) cash price for primary metal shipments.
The dip is attributed to weak demand, combined with abundant stocks in Japan. Concurrently, lower premiums in the U.S. and Europe influenced some aggressive negotiation stances. “Buyers pushed for US$90-US$95 per [metric] ton based on lower spot premiums. They settled at US$97 to hasten the discussions, a change from recent prolonged talks,” said a Japanese end-user source.
These quarterly discussions started late August, involving Japanese buyers and key global suppliers like Rio Tinto and South32. A global producer source noted that while demand from automakers is showing signs of revival due to the easing chip shortage, sectors like construction remain lackluster.
Furthermore, data from the Japan Aluminium Association revealed an 18-month consistent drop in shipments of aluminium sheets and extrusions, with a 4.6% decline reported in August.
Oversupply issues were accentuated as aluminium reserves at three key Japanese ports reached 360,700 metric tons in August, surpassing the optimal 250,000-300,000 metric tons as indicated by Marubeni. Despite a significant 30% YoY reduction in Japan’s primary ingot imports from January to August, stocks remained high. Notably, imports from Russia saw a staggering 65% drop. The decline from Russia comes after many Japanese businesses reduced Russian purchases post Moscow’s incursion into Ukraine.
For confidentiality reasons, the sources opted to remain anonymous.