Enquiries are pouring in for aluminium in Japan as prices touch records in a tight market, which expects that second-quarter MJP premiums will rise even further.

“We are getting lots of enquiries for metal and people are nervous,” a major producer source said, adding that given high spot premiums globally “we don’t have much metal to offer”.

Indications of spot MJP premiums on a cif basis have risen 25% in the past month and touched a record level of $300-320 per tonne this week.

Traders are selling aluminium at this level to end-users in a market where cif MJP business has been stifled by tight availability and stronger prices elsewhere, Metal Bulletin understands.

By contrast, first-quarter MJP premiums on a cif basis settled at $255-256 per tonne.

The consensus in the Asian market is that second-quarter MJP premiums – negotiations for which will begin at the end of February – are going to be higher than the first quarter’s and potentially even higher than spot premiums.

“End-users will need to accept [higher prices] as no one can offer below $300 at this moment,” a Japanese trader said, adding that he was offering metal for February and March delivery at premiums of $330-340 per tonne.

The second-quarter MJP premium could be close to $320-330 per tonne, a second major producer source said.

“If the North American premium is more than $450, then Asia can’t stay at $300,” the first producer source said.

“Asia has to pay high enough premiums to keep the metal from going to the USA,” the source added.

End-users in Japan are concerned about the higher MJP premiums but one well-postioned buyer said he feels reassured by the low LME aluminium prices.

“At this moment, the LME price is low and the gross price [LME price plus premium] is not much higher than last year,” a rolling mill source from Japan said, adding that “the impact of the increase on premiums is not so strong.”

“Demand from Japan is not increasing”, he said, adding that a premium at “$300 per tonne is not acceptable”.

“Second-quarter MJP premiums of $260-270 per tonne are acceptable,” the end-user said.

He added that he wants to see $250 per tonne in the third quarter and $230-240 per tonne in the fourth quarter.

“There is some fear of the Q2 MJP premium increasing, but I hope the LME warehousing rule change from April will decrease the premiums for Q3 and Q4,” the rolling mill source said.

Shivani Singh
Twitter: @ShivaniSingh_MB