Japan aluminum smelters considering alloy import due to high feedstock prices

Japanese secondary aluminum smelters making ADC12 aluminum alloy are considering alloy imports, rather than producing it themselves, due to higher costs of aluminum scrap feedstock, market sources said Tuesday.

Russian AK5M2 scrap-based feedstock used for ADC12 production was offered at $2,050-2,100/mt CFR Japan for February-March shipments, said Japanese trade and smelter sources.

There is usually a spread of $150/mt or more, between AK5M2 feedstock and ADC12 prices. ADC12, heard at Yen 200/kg ex-plant (2,160/mt) for this week's shipments, will not cover production costs, said trade and smelter sources.

Meanwhile, Russian ADC12 was heard offered at $2,190/mt CIF Japan for February-March shipments, traders said. One smelter official said a Yen 25/kg ($270/mt) spread is required between the feedstock and alloy products to breakeven.

The smelters are asking for higher prices from Japanese consumers. "Target is Yen 215/kg," said another smelter official. Prices are usually negotiated with term consumers twice a month.

Japanese domestic ADC12 alloy prices are often talked on the basis of London Metal Exchange high-grade aluminum prices. The LME prices in January averaged $50/mt lower than in December, and although some smelters achieved higher prices last month on the back of rising scrap feedstock costs, the increase was below target, seller sources said.