Third-quarter premiums for Japanese aluminium shipments will rise by 3 percent to US$108 per metric ton thanks to a fall-off in supply that overrode apprehension over a possible drop in regional demand.
The rise in premiums is the second consecutive rise, following an increase to US$105 per metric ton in April. Sources who spoke to Reuters say the agreed-upon premium was well below that initially sought by producers, which was in the range of US$115 to US$120 per metric ton. Negotiations took place over the past two weeks between Japanese buyers and major producers, including Alcoa Corp, Rio Tinto Group, and South32.
“We had signed all of our July-September term contacts at $108 a tonne by early this week,” one source confirmed to Reuters.
East Asia has seen a significant rise in spot premiums in recent weeks on account of a drop in shipments of semi-fabricated aluminium from China and other regional producers, which have fallen due to rising aluminium prices at the Shanghai Futures Exchange (ShFE).
However, sagging demand from Chinese buyers coupled with worries that demand would continue to fall thanks to trade tensions between China and the United States tempered gains, per another unnamed source whose employer inked a deal for third-quarter shipments for US$108 per metric ton.
Exports of Japanese aluminium fell again in May for a sixth consecutive month due to weakening demand for the metal by semiconductor manufacturers and automotive parts producers. Experts say such a fall portends a struggle ahead for Japan’s economy, as its strong dependence upon trade continues to face pressures from weakening demand abroad.