Japan: Aluminum premium falls by 12% to $195/t for Jan-Mar'22 quarter

For the Jan-Mar'22 premium long-term aluminum contract negotiations between overseas aluminum bullion producers and Japanese consumers and trading companies, the price offered was $195/tonne (t), down $20-25/t (12%) from the previous quarter. Notably, the price will be reduced for the first time in six quarters, according to a SteelDaily report.

The reduction in the premium price to Japan is the result of a weak spot market and low buying interest.

A trader reported receiving offers at $220/t by producers, while other traders did not report hearing this figure. Traders agreed that different trading houses may receive different offers early into the negotiations.

"It is recognised that the price has dropped but it is at a high level. Negotiations may proceed towards a lower price than the offered amount", said a trader source.

Auto output cuts bottom out

Domestic demand for aluminum bullions is expected to be on the path to recovery as production cuts by automobile manufacturers due to shortage of semiconductors as well as auto parts have bottomed out.

Toyota Motor Co. Ltd, the largest automaker in Japan, has restarted normal operations at its plant for the first time in seven months in Dec.

Given the new coronavirus mutant strain omicron, there is uncertainty in global demand. However, there has been no impact on economic activity and the effect on negotiations is expected to be limited.

The turmoil in marine logistics has affected supply and demand leading to the shortage of containers, though.

The premium for Japan is a surcharge that adds the fare, handling fee, and the amount according to Japan's supply and demand to the aluminum futures price on the London Metal Exchange (LME). Quarterly negotiations are held between overseas aluminum smelters and Japanese consumers to determine prices.