Almost all aluminium premiums decline amid worsening global economy

Several aluminium premiums in Europe and the United States reverted to mid-2021 levels or earlier amid a general downtrend in the week to Tuesday, October 4.

• Discounting widens in US, undercuts premium
• Drops approaching 16% hit some European premiums
• MJP registers a 2.8% decline, amid lower-than-expected automaking
• Brazil’s cif premium hits 2022 low on little need to import

US premium still in ‘freefall’

The aluminium premium in the United States continued an almost six-month-long decline on reports that discounting was becoming more widespread.

Fastmarkets’ assessed the aluminium P1020A premium, ddp Midwest US at 22.75-23.25 cents per lb on Tuesday, down from 23.00-24.00 cents per lb on a week earlier.

Consumers reported getting unsolicited general offers at a discount to published premiums and said discounting seemed to have become more widespread.

A downward cycle continues whereby some sellers feel compelled to undercut premiums published by price reporting agencies, Fastmarkets’ understands.

There was talk during the assessment week that the London Metal Exchange was considering a possible ban on Russia-origin aluminium.

The metal price jumped up by 8.5% in intraday trade on Thursday, after the initial report of that possibility. The LME later clarified to Fastmarkets that it had not committed to undertaking a consultation about Russian aluminium.

Meanwhile, the US premium fell in the following day’s assessment. Fastmarkets’ assesses the P1020 premium twice each week, on Tuesday and Friday. On Friday September 30, the premium declined by 0.5 cents on the high end, to 23.00-23.50 cents per lb.

“The premium has been in a freefall,” one seller source said, referring to its continued decline from a 40-cent-per-lb midpoint back in early May.

“What premium you offer depends on how desperate you are,” the source added.

A second trader agreed that he could not predict the bottom. “All I know is that the premium keeps falling,” he said.

The premium remains at its lowest in 18 months, having last been at a 23-cent-per-lb midpoint on April 13, 2021.

Rotterdam premiums near 10-month low, Italy’s lowest since June 2021

European aluminium premiums continued to move lower in the week to Tuesday October 4, with premiums in Rotterdam reaching an almost 10-month low on weak economic sentiment and falling consumer demand.

Fastmarkets assessed the aluminium P1020A premium, in-whs dp Rotterdam at $335-365 per tonne on Tuesday, unchanged from last Friday’s assessment but down from $365-400 per tonne a week earlier.

The premium’s mid-point is now more than $100 per tonne lower than early September’s $430-480 per tonne levels.

“I don’t think it’s purely a sentiment story anymore. True fundamentals are now kicking in and no one factored in demand dropping by up to 70% [for certain consumers] but that’s the reality the market is facing. With the way demand is going, people are fighting for liquidity,” one European trader said.

Duty unpaid premiums also continued to move lower in the week, and Fastmarkets assessed the aluminium P1020A premium, in-whs dup Rotterdam at $240-265 per tonne on Tuesday, unchanged from a day earlier but down by 14% from $280-310 per tonne a week earlier.

The premium is now about half of all-time high levels of $500-510 per tonne in May and is at its lowest level since December 13, 2021.

But others noted increased clarity regarding demand, following a trade fair in Dusseldorf, Germany over September 27-29.

“Where a month ago people were in fear due to the absence of a sense of direction, it feels now that they have accepted demand is [going to be] down and are working on dealing with the situation,” a second trader in Europe said.

Beyond Rotterdam, premiums in Italy and Spain were also under pressure, moving lower as a result of high stock and softer demand.

Fastmarkets assessed the aluminium P1020A premium, fca dp Italy at $350-390 per tonne on Tuesday, down by 15.9% from $430-450 per tonne a week earlier.

The premium is now at its lowest in over 15 months; it was at $350-380 per tonne in June 2021.

Participants noted that premiums in Italy were coming under additional pressure from a number of discounted offers for specific brands, which forced others in the region to be more competitive.

“I’m offering at the same level in Italy as I am in Rotterdam, I see no premium for Trieste anymore, the market is incredibly weak,” a third trader said.

In Spain, Fastmarkets assessed the aluminium P1020A premium, fca dp Spain at $370-390 per tonne on Tuesday, down from $450-470 per tonne two weeks earlier.

Brazil import premium falls to 2022 low

The persistent downtrend around the world continued to put pressure on the import premium in Brazil, but lower offers were not enough to ignite spot interest in foreign metal.

Fastmarkets assessed the aluminium P1020A premium, cif dup Brazilian main ports at $380-400 per tonne on Tuesday, down by $20-30 per tonne from $400-430 per tonne a fortnight earlier.

This is the lowest the premium has been since December 29, 2021.

“Premiums are falling fast in other countries, and of course that is slowly reflected in lower premiums for Brazil,” one trader in the country said.

“But you need demand to close deals, and we do not have any significant interest for spot cargoes right now,” the trader said.

Spot business remained slow, and even contract negotiations for 2023 are failing to gain some momentum.

Buyers are worried that the country’s annual duty-free import quota would be phased out next year.

“We need at least an indication of what will happen,” a second trader in Brazil said. “But let’s be honest, we used too little of this year’s quota, so I don’t see why they wouldn’t cut it.”

In 2022, the import quota for unalloyed aluminium was set at 350,000 tonnes by the Brazilian government.

But by September 24, only 156,866 tonnes had been applied for.

For domestic material, there were no changes in the past fortnight. Fastmarkets’ assessment of the aluminium P1020A premium, delivered São Paulo region was $400-450 per tonne on Tuesday, unchanged since September 6.

MJP premium slips despite new fiscal half commencing

The main Japanese port (MJP) premium declined on the low end amid mixed sentiment.

Fastmarkets’ assessment of the aluminium P1020A (MJP) spot premium, cif Japan was $80-95 per tonne on Tuesday, down by $5 per tonne on the low end from $85-95 per tonne a week earlier.

“With the first half of the financial year over, the expectation is that destocking efforts, which placed pressure on the premiums, will slow down and provide some support to the premium,” a producer source in Japan said.

With the start of the second half of the fiscal year in October, sellers are less likely to discount metal just to get it off their books, he added.

On the other hand, there was some concern about the LME possibly banning Russian aluminium.

“In the short to medium term, there could be more downward pressure on premiums,” a Singapore-based trader said.

“The Chinese import arbitrage window closed as the LME price of aluminium rose upon the news of the potential ban on Russian metal by the LME,” a Hong Kong-based trader said.

The domestic market remains well stocked with primary aluminium, sources said.

“End users are shifting toward the domestic market rather than the cif [import] market,” the Singapore-based trader said.

Demand from the automotive sector is being affected by ongoing supply chain and logistical problems, and production forecasts have been revised downward, sources said.

Toyota expects global production in October to total 750,000 units, instead of the 900,000 units a month it initially announced for the September-November period.

Meanwhile, fourth-quarter negotiations advanced with a new producer-consumer deal reportedly concluded at a premium of $99 per tonne for the quarter.

In South Korea, premiums continued to decline amid scant purchasing.

“The economy in South Korea is bad. Exports - not just value-added [aluminium] products, but downstream products like automotives and machinery - are also experiencing a slowdown,” a second Singapore-based trader said.

Fastmarkets assessed the aluminium P1020A premium, fca South Korea at $105-115 per tonne on Tuesday, down by $5 per tonne on the high end from $105-120 per tonne a week earlier.

Fastmarkets’ assessed the corresponding aluminium P1020A premium, cif South Korea at $90-100 per tonne on Tuesday, also down by $5 per tonne on the high end from $90-105 per tonne a week earlier.

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