First Japanese Q2 2024 aluminum premium deal reported at $145/mt CIF Japan
Negotiations still ongoing across industry
Current QMJP offers heard at $155/mt
Japan premiums supported by broader Asia premium strength
The first quarterly aluminum premium contract for shipment volumes of 1,000 mt/month or more over April-June was reported at $145/mt, plus London Metal Exchange cash settlement average of the shipment month, CIF Japan. The deal was reported by a Western producer on March 21 after the Asian close.
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The reported premium for this first Q2 2024 MJP deal represents an increase of about 60% from the Platts Q1 2024 MJP assessment of $90/mt, and is higher than any of the QMJP settlements in 2023.
Prior to the market close, the latest offer indications stood at $155/mt while buyer indications were last heard in a range of $125-$135/mt.
Sources said March 21 that an earlier offer at $150/mt from one of the producers was revised higher to $155/mt, following an earlier adjustment from $145/mt.
The QMJP negotiations are still underway across the industry, and more transactions are expected to be reported over the next two weeks or so, according to market participants.
Platts, part of S&P Global Commodity insights, assessed the CIF Japan spot premium for 99.7% P1020/P1020A aluminum ingot at $126/mt plus LME cash on March 21, up $1/mt on the day.
Prices continue to be buoyed by rising premiums observed in South Korea, China and the broader Asian continent.
Market views split on supply-demand fundamentals
Preliminary market reaction to the first QMJP deal reported as well as general market views were divergent.
Overall, while Japanese downstream demand did not reflect a meaningful recovery, factors supportive of the premiums include freight dislocations due to the Red Sea developments, shipment delays and lower P1020A access in general.
“With [South] Korea and China being willing to pay higher, the Japanese premium would definitely have to follow suit,” a Japanese trader said, adding that they saw Japanese spot premiums potentially moving higher in the $130-$150/mt range in the second quarter.
A Japanese consumer said rising Japanese premiums were largely attributed to higher Chinese premiums, but downstream demand remained lackluster in Japan, with port stocks still above 300,000 mt in the latest February count.
“I actually don’t see downstream demand recovering that much in Q2 to the extent of supporting much higher premiums, although some supply issues continue to have lingering impact,” an Asian trader said.
An Asian producer said they had noticed “generally more anxiety” in the market for securing tonnage supply compared with the past two quarters, with fewer buyers committing to annual contracts earlier this year, which may have fueled additional supply concerns.
Market participants also referred to a wide contango between the LME Cash and three-month contracts — that stood at $51.75/mt as of the March 20 close — as another incentive for sellers to hold metal while the price uptrend sustains.
In China, the import arbitrage window widened across the week, with Shanghai Futures Exchange primary aluminum futures climbing despite increased talk of Yunnan aluminum smelters restarting curtailed capacity.
Yunnan is looking to allocate power supply for resuming primary aluminum capacity that was curbed in the fourth quarter of 2023, which was equivalent to more than 500,000 mt/year of smelting capacity, according to sources at local smelters in the southwestern Chinese province.
The resumption is expected to be earlier than last year and is primarily attributed to reduced power transmission requirements to the eastern region of China and rising wind and solar power supply, industry sources said, which leads to more power supply being available for Yunnan itself.
However, any increase in domestic primary aluminum output due to the resumption of work in Yunnan will only be reflected in April, sources said.
Chinese smelters’ profit margins are expected to remain above Yuan 2,000/mt in March as electricity and prebaked anode prices remain relatively stable, while alumina prices have trended slightly lower, according to state-owned research agency Antaike.
Chinese primary aluminum prices are expected to remain supported in the near term, as downstream demand is expected to pick up in the upcoming peak season while smelter restarts could take time to complete, sources said.
