Negotiations underway: Japan's aluminium premiums could jump to $155/t

Discussions are underway regarding the premium on aluminium stocked in Japan for the April to June period, involving overseas producers, domestic consumers, and major trading companies. Producers suggest a premium between $145 and $155 per tonne, indicating a substantial 61-72 per cent increase from the previous quarter. If consumers accept these terms, it will mark the first time in three quarters that the premium falls within the $100 per tonne range.

The tightening of domestic supply and demand is influencing producer prices. Combined port inventories at Yokohama, Nagoya, and Osaka have exceeded 300,000 tonnes since the beginning of the year, serving as a crucial indicator for supply and demand. Despite this, a source from a trading company noted, "While the figures for port inventories may not fully capture it, the impact of the supply decline is evident."

In addition to sluggish domestic demand, importing aluminium ingots in 2023 experienced a significant 26 per cent year-on-year decline, attributed to the perceived undervaluation of premiums to Japan compared to other regions. Consequently, the utilisation of intermediate inventories held by consumers has increased.

Moreover, Japan's comparatively reduced premium rates seem to bolster the recovery compared to other areas. Regarding the projected negotiations, a spokesperson from a trading firm commented, "Producers and consumers alike foresee a rise in prices from the preceding quarter, indicating that agreements are likely to be finalised by month-end, as is customary. The result will depend on the level of willingness among consumers to agree on future terms."

Received under the content exchange agreement with SteelMint