Aluminium premiums being supported in all key regions

Aluminium premiums in all key regions remained well-supported in the week to Tuesday June 18, amid ongoing reports of tight availability, while market participants in Europe and Asia are focusing on ongoing negotiations for Japanese third-quarter supplies

Asia

The main Japanese port (MJP) aluminium premium rose in the week to Tuesday, supported by tight availability and quarterly negotiations, sources told Fastmarkets.

Fastmarkets’ twice-weekly assessment of the aluminium P1020A (MJP) spot premium, cif Japan was $145-160 per tonne on Tuesday, widening up from $145-155 per tonne on Friday, and up from $140-155 per tonne a week ago.

“Domestic demand for aluminium is still quite low, but logistical issues have had a big impact on the quarterly negotiations,” a trader said.

And a second trader said: “Domestic tender levels have been rising, mostly on the back of expectations for Q3 premiums to settle at a high level.” 

The focus remains on negotiations for supplies of primary aluminium in the third quarter to MJP, with one producer offer said to have been revised higher to around $185-190 per tonne, Fastmarkets understands.

Market participants remain divided about the quarterly negotiations, however, because while currently steady, demand for aluminium could be affected by an investigation into the certification of certain models of cars in Japan.

Aluminium premiums in South Korea, meanwhile, pushed up amid tightness in supplies, despite stable, but limited, demand.

“Demand is still poor in South Korea, with an absence of large deals and tight inventories,” one source told Fastmarkets. “Most market participants are awaiting further progress in the quarterly negotiations.”

Fastmarkets assessed the aluminium P1020A premium, fca South Korea at $170-180 per tonne on Tuesday, up from $160-170 per tonne a week earlier.

Fastmarkets assessed the aluminium P1020A premium, cif South Korea at $155-165 per tonne on Tuesday, up from $145-155 per tonne the previous week.

Chinese aluminium premiums continued to stay flat given the closed import arbitrage window over the past two weeks.

Fastmarkets’ fortnightly assessment of the aluminium P1020A premium, bonded, in-whs Shanghai was $160-165 per tonne on June 18, unchanged from June 4, while the aluminium P1020A premium, cif Shanghai also stayed flat at $150-155 per tonne in the same comparison.

“I have not been paying much attention to the Chinese aluminium market recently, given the closed import arbitrage window,” a trader said. “I expect the premiums rarely changed.” 

The aluminium import arbitrage stood at a loss of $212.53 per tonne on Tuesday, compared with a loss of $291.10 per tonne on June 4.

“When aluminium premiums to other Asian countries are going up, no one would reduce premiums to the Chinese market, despite the quiet spot market,” a second trader said. “Participants would like to keep the premiums [on a CIF Shanghai basis] at around $150 per tonne.”

Sources said those who had cargoes in Chinese bonded warehouses were considering selling the metal to nearby countries, such as Japan and South Korea, where they can achieve higher prices.

Europe

The duty-unpaid premium in Rotterdam edged higher in the week following continued reports of tight regional supplies, while other European premiums remained stable amid mixed regional sentiment.

Fastmarkets assessed the aluminium P1020A premium, in-whs dp Rotterdam at $325-350 per tonne on Tuesday June 18, unchanged from the previous week and stable since May 21.

A wide spread in liquidity was reported to Fastmarkets, with a lack of clarity over the direction of premiums for the second half of the year, market participants said.

“There were a few jitters in the market following the large LME delivery and the expectation of [improved] availability, but it feels like the market has relaxed a little since then,” a trader in the region told Fastmarkets.

“There’s been a realization that Europe does need those tonnes, and that they’ll come slowly but surely and are likely to get allocated quickly,” the trader added.

A second trader in Europe warned that increased risks might result in fewer shipments from Asia.

“There’s quite a bit of downside risk to the premium if you think about it in the longer term, which will make people more hesitant about [bringing vessels from Asia into Europe],” a second trader said.

“If the Red Sea issue gets resolved, freight [rates fall] or there’s progress with Russia and Ukraine, that is likely be negative for premiums,” the second trader added. “It doesn’t mean no one will take a risk, but it does mean people might be more cautious about doing so – especially with the low European demand.”

A third European trader said pressure on premiums was informed by more vessels coming to Europe.

“Realistically, those units will only be available from September, but it is already [affected the] mood for the second half of the year,” the third trader said.

Elsewhere, the duty-unpaid premium edged higher with market participants pointing to continuing tight availability, rising freight costs and higher offers for MJP third-quarter supplies.

Fastmarkets assessed the aluminium P1020A premium, in-whs dup Rotterdam at $250-280 per tonne on June 18, rising from $250-270 per tonne the previous day and now up by 83% from $135-155 per tonne at the beginning of the year.

The wide contango in nearby LME spreads also remained supportive, with several higher offers in the market, according to market participants.

The LME cash/three-month spread was most recently in a contango of $54.21 per tonne, compared with a $61 per tonne contango at the same time last week.

Beyond Rotterdam, premiums in Italy were stable, with stable market conditions as the summer holiday season approaches, sources said.

Fastmarkets assessed the aluminium P1020A premium, fca dp Italy at $385-405 per tonne on Tuesday, unchanged from the previous week, but up from $350-400 per tonne one month earlier.

United States

The US premium for P1020 aluminium tightened in the week to June 18.

Fastmarkets assessed the daily aluminium P1020A premium, ddp Midwest US at $0.200-0.210 per lb on Tuesday, June 18, compared with $0.195-0.215 per lb on June 11.

There has been a slight pick-up in spot activity in the US, a trader there said.

And a second US trader said the ongoing scrap tightness was continuing to support demand for P1020 material.

“Scrap has been tight all year and it will continue to be tight,” the second  US trader said.

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