Japanese primary aluminium premium expected to stabilise in Q3CY23

The Japanese primary aluminium premium for the September'23 quarter is expected to remain relatively unchanged from the previous quarter, according to sources.

A buyer has recently agreed to pay a premium of $127.5/t to a global producer, slightly lower than the premium of $125-130/t in the June quarter. Producers initially offered premiums of $165-180/t, but buyers pushed for lower levels.

The agreed premium for the September quarter represents an increase of over 20% compared to the premium of $95-105/t in the first quarter of 2023. This decision comes after several rounds of negotiations, with producers aiming to raise premiums due to tighter global market conditions. However, buyers were cautious, citing weak domestic demand and ample inventories.

Japan, Asia's largest importer of aluminium, plays a significant role in setting the regional benchmark premium for primary aluminium shipments. The recently agreed premium is considered a middle ground between producers and buyers.

While one buyer has accepted the premium offer, many others have not yet agreed and aim to settle at lower levels of $100-110/t. The pricing talks, which involved Japanese buyers and global suppliers such as Rio Tinto and South32, began in late May and extended beyond the usual timeframe, indicating the challenging negotiations between the parties.

Producers predicted a tighter market due to higher overseas premiums, but buyers did not agree as domestic demand remained weak with ample inventories.

Aluminium stocks at major Japanese ports were recorded at 354,000 t at the end of May. The outcome of the pricing talks will have implications for the overall aluminium market, particularly in Asia, as it sets the tone for future pricing negotiations and market dynamics in the region.

Note: This article has been published in accordance with an article exchange agreement between Alcircle and SteelMint.