A glut in supply has driven premiums for aluminium shipment to Japan in the current quarter to two-year lows. So said sources who spoke to Reuters earlier this week.
Per the sources, the lion’s share of deals were conducted at US$85 per metric ton above spot price, though a handful were settled at US$84 and US$83 per metric ton. Though producers sought premiums of between US$91 and US$93 per metric ton, such prices did not convince buyers aware of producers’ warehouses full stocks of aluminium.
“We have settled the majority of deals at US$85 a tonne but some deals were signed at US$83,” disclosed an unnamed source at a buying firm to Reuters.
A second source told Reuters that the vast majority of their deals were made at US$85 per metric ton, with a few others settled at US$84 per metric ton.
Such premiums are between 17 and 19 percent off on the quarter, down from the fourth-quarter premiums of US$103. This quarter’s drop is the second in a row so far. This quarter’s premiums, which are the product of negotiations begun as early as November between Japanese buyers and global producers including Alcoa, South32, and Rio Tinto, are the cheapest yet negotiated since 2016’s closing quarter.
As Japan is Asia’s most prolific importer of aluminium, the premiums negotiated with its buyers are seen as a bellwether and a beacon by which much of the rest of the region bases its own premiums.
According to a third source, the weaker deals were the product of predictions of weaker economies in the United States and the People’s Republic of China combined with the impending relaxation of U.S. government sanctions on Rusal, which was announced on December 20.
Going forward, market experts project a pick-up in prices during the spring quarter, rising to match an expected increase in demand.