Japan buyers agree to Q2 aluminium premium of $172/T, sources say

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Containers are seen at an industrial port in the Keihin Industrial Zone in Kawasaki

By Yuka Obayashi

TOKYO (Reuters) – The premium for aluminium shipments to Japanese buyers for April to June was set at $172 a tonne, down 2.8% from the previous quarter, as weak demand in Japan and China outweighed concerns of supply disruptions from Russia, five sources said.

The figure is lower than the $177 per tonne paid in the January-March quarter and marks a second consecutive quarterly drop. It is also lower than initial offers of $195-$250 made by producers.

Japan is Asia’s biggest aluminium importer and the premiums for primary metal shipments it agrees to pay each quarter over the benchmark London Metal Exchange (LME) cash price set the benchmark for the region.

The sources, who were directly involved in pricing talks, declined to be identified because of the sensitivity of the discussions.

One of them, who works at a Japanese trading house, said the decline in premiums reflected weak demand from the automobile sector as it deals with a chip shortage, as well as amply supply in Asia as China has increased exports of semi-manufactured metals.

A tight container market and high freight rates also made it difficult for the metal to be shipped from Asia to Europe or North America where premiums are much higher, the source said.

China is increasing exports of aluminium to fill a widening supply gap in Western markets.

Global suppliers such as Rio Tinto and South32 and Japanese manufacturers of rolled products and trading houses began price negotiations in early March. The talks took longer than usual because of uncertainty about exports from Russia as a result of sanctions following its invasion of Ukraine.

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Russia accounted for 17% of Japan’s total imports of primary aluminium ingots in 2021 and 6% of global aluminium supply.

Concerns about the impact of disrupted Russian shipments as well as reduced output because of high power prices drove aluminium prices to a record high of $4,073.50 a tonne in early March.

The duty-paid physical premiums in Europe and the United States have soared to $595 a tonne and $880 a tonne, respectively, while Asia’s spot premiums have remained around $110-170 a tonne this year, the sources said.

Another of the sources said so far Russia’s Rusal had maintained shipments to Japan, which made global suppliers retreat from high initial offers.

However, another of the sources said Asian supplies might get tighter as “global traders have been collecting primary aluminium from several locations in Asia and sending them to Europe or North America by chartering bulk ships to take an advantage of higher premiums”.

(Reporting by Yuka Obayashi; Editing by Himani Sarkar and Barbara Lewis)