Japan aluminum alloy prices slip due to cheaper European feedstock

The prices of ADC12 secondary aluminum alloy in Japan are softening on the back of cheaper scrap feedstock from European countries, putting downward pressure on ADC12 import prices, market sources said Tuesday.

Japanese traders said domestic ADC12 prices had fallen this week, partly due to an automaker having settled the July-September contract price around 5% lower than the previous quarter, and also due to the availability of cheaper aluminum feedstock from Europe.

In June, ADC12 sold on monthly or bi-monthly contracts, or on a spot basis, was at levels above Yen 190 ($2.40)/kg on a delivered basis. This week, price levels were Yen 180-190/kg delivered, traders said.

Domestic production costs are decreasing as the prices of aluminum alloy feedstock are down, traders said.

Russian-origin AK5M2 feedstock, with 1.0% zinc and 0.5% magnesium content, was offered Tuesday at $1,860-1,870/mt CFR Japan, August shipment, a trader said. AK5M2 traded at $2,000-2,050/mt CFR Japan a month ago.

The trader attributed the lower prices to poor demand from European secondary aluminum smelters.

Another trader put the cost of producing ADC12 using the $1,860/mt AK5M2 feedstock at Yen 180/kg at the most.

"There is even cheaper feedstock available," a third trader said. Some Japanese smelters are believed to be using 226-grade secondary aluminum alloy stored at London Metal Exchange warehouses. Aluminum alloy on the LME traded below $1,800/mt last week.

Meanwhile, Japanese traders focused on importing ADC12 alloy from China said domestic ADC12 alloys being more competitive had affected their trade.

"They [Japanese end-users seeking September-October deliveries currently] can see from the current feedstock prices that domestic smelters will be able to deliver at Yen 180-190/kg. So they are asking importers $2,100/mt CIF Japan or less, $50/mt below the actual import price levels," a trader said.