Proposed Reduction in Premiums
A leading global aluminum producer has put forward a proposal to Japanese buyers, suggesting a premium of $95 per metric ton for primary aluminum shipments scheduled for the January-March quarter. This proposal marks a 2% decrease from the current quarter’s rate of $97 per ton. The offer is part of the ongoing quarterly pricing negotiations between Japanese buyers and global suppliers, including major industry players like Rio Tinto and South32.
Benchmark for Asian Market
Japan, being Asia’s largest importer of aluminum, plays a pivotal role in setting the regional benchmark for premiums over the London Metal Exchange (LME) cash price. The proposed premium for the upcoming quarter is the lowest since the same period earlier this year.
Negotiations, which commenced late last month, are expected to continue through December. The initial $95 offer was made by one global producer, while another indicated a similar level, though not formally offered, according to a source from a Japanese trading house.
Buyers Seeking Further Reductions
Japanese buyers are reportedly advocating for even lower premiums, citing the current spot premiums hovering around $80. Factors influencing this stance include tepid demand, the desire to reduce inventory before the fiscal year ends in March, and the current aluminum stock situation. As of October’s end, aluminum stocks at three major Japanese ports stood notably higher than the previous year.
Market Trends Influencing Negotiations
The declining demand in both Europe and the United States has also contributed to the push for lower premiums in Japan. The nation’s shipment of aluminum sheets and extrusions saw a 1.4% year-on-year drop in October, continuing a 20-month trend of decline. This sluggish demand is a key factor in the ongoing negotiation dynamics.
Confidentiality of Discussions
The sources involved in these discussions have chosen to remain anonymous due to the sensitive nature of the negotiations. This development in the aluminum market highlights the complex interplay between global supply, regional demand, and financial strategies impacting the metals industry.