Fourth Quarter Aluminium Premiums Rise For First Time In Five Quarters To US$88 Per MT

Fourth Quarter Aluminium Premiums Rise For First Time In Five Quarters To US$88 Per MT

Hints of a recovery in demand for aluminium in Japan came in the form of a rise in contracts for fourth-quarter premiums, as a quartet of anonymous sources told Reuters that buyers have already agreed to pay US$88 per metric ton above LME prices.

“We have agreed with a producer at $88 a tonne this week,” revealed one anonymous Japanese buyer to the news service yesterday.

Japan’s fourth quarter is shaping up to be a promising one, as premiums have risen for the first time in over a year. Contracts for the fourth quarter are up by 11 percent over third-quarter prices.

Sources say sellers initially sought premiums of between US$95 and US$98 per metric ton, well above third quarter contracts of US$79 per metric ton. Negotiations began last month between buyers and aluminium heavyweights Rio Tinto Group and South32, and sources expect talks to continue through the month.

Experts say the rise in premiums is a result of an uptick in demand for primary aluminium by Japan’s automotive and electronics sectors. However, Reuters’s source said that the recovery is slow at present.

“We were surprised to see a supplier coming down from its initial offer of $98 a tonne to $88 fairly quickly,” exclaimed another anonymous source, noting that a rise in aluminium prices is likely to foster a rapid compromise by producers. Aluminium prices are up over 20 percent since bottoming out in April due to the coronavirus’s impact on the global economy and domestic demand.

“Next focus is whether other suppliers would follow the peer at a time when the U.S. and European premiums are much higher,” predicted another anonymous source from a trading house.