Japan's Q4 aluminum premiums hold at $420/mt despite spike in US, Europe

Japanese aluminum premiums for the fourth quarter continue to settle at $420/mt plus London Metal Exchange cash, CIF Japan, unaffected by the recent spike in the US and the European spot premiums, market sources said Tuesday, September 16.

Two out of four producers negotiating the premiums for primary aluminum to be delivered to Japan in Q4 have agreed with several Japanese buyers to set the premiums at $420/mt plus LME cash CIF Japan, sources involved in the negotiations said.

The Q4 premiums were up 3-5% from Q3's $400-408/mt plus LME cash CIF Japan.

Platts reported the first settlement at $420/mt plus LME cash on September 3. A second producer agreed at a premium of $420/mt late last week, buyers said.

US spot premiums have risen by 2.7% to a record high of 21.25 cents/lb ($467.50/mt) plus LME, delivered Midwest, on September 11, Platts data showed.

The US premiums stayed at 21.25 cents/lb as of September 15, affected by tight supplies, rising domestic freight and the LME aluminum contract nearby spreads widening to over $35/mt after flipping into backwardation on August 29.

Spot premiums in Europe tracked the US, rising to $450-470/mt plus LME cash in-warehouse Rotterdam, duty-paid basis, on September 11, up 2% from the previous $440-460/mt.

The premiums stayed at $450-470/mt on September 15. Japan imports ingot and value added products from North America, and from the Middle Eastern and African smelters, who sell to Japan as well as to Europe.

"The $420/mt was a set deal," said one Japanese buyer.

A Japanese trader said he has not observed any changes in demand and supply fundamentals in Japan in the last few months.

"After the news of the quarterly premium settlement rising from the previous quarter, some domestic buyers may start calling for some volumes but there is no move," said another trader, adding that market was holding stable.

The Japanese buyers said they have bid $420/mt premiums to two other producers, who have offered $430-460/mt plus LME cash CIF Japan.

"We have agreed with $420/mt and I am urging other producers to align with this settlement," said a buyer.

Producers could not be reached for comments.

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