MJP aluminium premiums for Q4 will take time to settle

Negotiations between producers and buyers for main Japanese port (MJP) aluminium premiums for fourth quarter delivery continued this week, with purchasers pushing for lower premiums.

Rio Tinto opened talks for Q4 MJP premiums via a detailed letter it sent to clients on August 24 asking for a premium of $250 per tonne.

“We have talked to all producers, the Rio Tinto letter came in at $250 per tonne, another producer is offering at $260 per tonne, another is offering close to $250 per tonne, while a fourth has not offered a concrete number yet,” a source involved in talks at a large trading house in Japan said.

The producer offering at $260 is unlikely to make deals at this level, he said, adding that the higher figure was a surprise as most producers follow Rio Tinto’s lead in these negotiations.

“Looks like there is a very wide disparity of premium views and the negotiations will be lengthy,” a major producer said in an email to Metal Bulletin.

Most market participants believe that the talks may extend well into Metal Bulletin’s annual conference in Geneva later this month.

“We haven’t yet received the $260 offer but Rio Tinto is offering at $250 per tonne and Alcoa is also offering to us at $250 per tonne,” a second trader from Japan said.

Some producers are offering at the same level as Rio Tinto, while other producers have yet to provide concrete figures, a third trader said from Japan.

Most buyers are pushing for premiums to be lowered, with some smaller participants confident that premiums will fall.

“We are in early discussions and, as always, our customers are asking for a reduction from Q3 premiums [$250 per tonne] without specifying the amount,” an aluminium producer source from the Middle East said.

“As you know, the MJP is really settled by the ‘big boys’ [Rusal, Rio Tinto, BHP Billiton and Alcoa] and we are price takers, so all we really conclude is the volume and then take the MJP at whatever level it is settled at – at least then our management knows we are at the market level and not below,” he added.

“I have heard from others that $250 looks to be optimistic given what is happening in Europe and North America,” he said, adding that he expects premiums to settle above $245 per tonne.

“US and European premiums are getting lower, there is no reason to increase premiums in Asia,” the second Japanese trader said.

“I expect Q4 MJP to settle below $250 per tonne,” the first Japanese trader said.

Traders elsewhere in Asia also expect Q4 MJP to settle lower.

A South Korean trader pegged Q4 MJP settlement at “around $245 per tonne”.

“The offer talks have been going on, $245 may be the lower end,” a Singapore-based trader said, adding that some buyers and sellers may settle at $247-$248 per tonne.

Aluminium trading in the rest of Asia has been quiet except for the latest stockpiling by South Korea’s state agency.

“Nothing is happening in Asia, partly because of the MJP negotiations and partly due to slowdowns elsewhere,” the Singapore trader said. “Countries that were booming like Thailand are slowing down a little.”

There is no demand from buyers, and sellers in Asia don’t want to offer at lower levels, he added.

Metal Bulletin’s Singapore and Johor aluminium premiums are in the range of $180-190 per tonne.

In China no deals have been reported as the arbitrage window remains closed.

The aluminium premium on a Shanghai cif basis is indicated at $250 per tonne.