According to sources in the Japanese market, Russian Federation aluminium major UC Rusal is of the opinion that the second quarter contract premium should be US$125 per metric ton plus London Metal Exchange cash CIF (cost, insurance, and freight) Japan.
Such a premium is almost one third above the contract price for the present month of US$95 per metric ton plus LME cash CIF Japan.
The sources, who were not identified in the article, went on to say that they are awaiting second-quarter offers from Rio Tinto Japan and South32 before making a purchasing decision. The contract negotiations for the second quarter include P1020/P1020A ingot and certain value-added products.
“The question is, will Rio and South32 offer above Rusal?” observed an unnamed Japanese trader.
The trader went on to say that spot premiums for aluminium from the United States would heavily influence premiums for the coming quarter, as most producers who have been supplying Japanese buyers have been sending metal to the States over the past several weeks. Spot premiums from producers in the US were at near two-year highs of US$220 per metric ton for the past week.
“Producers have been saying, Japanese need to pay the US equivalent or they will sell to the US,” another Japanese trader told an industry media outlet.
“Producers see the Midwest premium to be at 10 cents/lb or at other numbers. They may say, the appropriate Japan level would be at US premiums minus extra freight cost for shipping the metal to the US away from Asia,” he continued.
For reference, bulk freight from Australia to New Orleans is between US$25 and US$40 per metric ton.
According to one mill buyer, his firm has been receiving more inquiries from end-user sources and, as a result, will be in the market for a few hundred more tons of the metal to fulfill orders.
“We will go to the local spot market rather than import. There are traders destocking and they are generous with lower premiums,” said the buyer.
“Japan is around the first quarter contract level of 95, Japan is digesting stocks and have enough,” said a producer source.