Japan's Q3 aluminium premium drops about 8% to $118-119/T

According to a latest Reuters update, Japan's Q3 aluminium premium has dropped to $118-119/t. July –September premiums have registered a drop first time in 3 quarters.  Producers have initially proposed $123-128/t. Now, with the drop in premium, Japanese aluminium buyers will pay up to 8% less in July to September quarter. The news came from five sources directly involved in quarterly pricing analysis.

The latest drop in quarterly premiums follows two quarters of rising premiums, up 35% in Q2 and up 27% in Q1.

"We have settled the deals at $118 and $119 a tonne with all of the producers whom we buy the metal from," a source at an end-user said. He declined to be named due to the sensitivity of the talks.

Another fabricator quoted $118 a tonne as the settled premium for all deals while another source at an end-user said his company has agreed to pay $119 a tonne. A producer source said all deals were settled last week.

It is noteworthy that the price negotiations for quarterly premiums began last month between Japanese buyers and global aluminium producers like Rio Tinto, South32, Alcoa Corp and Rusal, with initial premium offers of $123-128 a tonne.

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Buyers started negotiations at around $110 to $115 a tonne on account of lower spot premiums in Asia and the United States, but finally deals were signed at around $ 119.

"If the $119 deals were not so quickly signed early this month, we could have sought much lower levels," one source said. 

Japan is Asia's biggest importer of aluminium and the premium paid by Japanese players over the London Metal Exchange (LME) cash price in each quarter for primary metal shipments sets the benchmark for the region.