Aluminium premiums still under pressure in Japan, Europe, Brazil, but US market quiet

Aluminium premiums continued their global downtrend in the week to Tuesday September 6 with the exception of the US Midwest premium, which was unchanged after the Labor Day holiday in the United States.

  • Japanese premiums dip on increasingly bearish sentiment
  • Rotterdam premiums drop on greater availability of imports
  • Import offers under pressure in Brazil from global downswing
  • US Midwest premium stable on subdued spot market, holiday.

Dip in MJP premium

The main Japanese port (MJP) premium dipped in the week to Tuesday due to increasingly bearish sentiment.

Fastmarkets’ twice-weekly assessment of the aluminium P1020A (MJP) spot premium, cif Japan, was $85-95 per tonne on Tuesday, narrowing downward by $5 per tonne from $85-100 per tonne on Friday, and down by $5 per tonne overall from $90-100 per tonne on August 30.

“The tradeable volume is low, with no incentive to deliver to Japan. Japanese traders and end-users are reluctant to buy metal from the international market,” a Japan-based trader said.

“There’s a lot of stock in Japan, and there are attempts to destock in order to avoid backwardation and its effects on balance sheets,” a Singapore-based trader said.

Despite announcements of smelter curtailments in Europe, market participants remained bearish, given the high inventory levels in Asia, particularly Japan, and were more concerned about forward demand.

“Although orders are good, inflation is [beginning to have an effect] and downstream sectors such as the automotive industry will be affected,” the same Singapore trader said.

On the other hand, fourth-quarter negotiations have begun, with offers heard below Fastmarkets’ assessed level in the third quarter of $148 per tonne.

The fourth-quarter offers heard during the week were at $133, $120 and $115 per tonne.

Elsewhere, the South Korean market was unchanged from the previous week amid soft buying activity.

“[There is] no change in South Korea – inquiry levels have been low,” another Singapore-based trader said.

Fastmarkets assessed the aluminium P1020A premium, fca South Korea, at $110-120 per tonne on Tuesday, unchanged from the previous week.

The corresponding aluminium P1020A premium, cif South Korea, was assessed at $95-105 per tonne on Tuesday, also unchanged from a week earlier.

European premiums lower across board

European aluminium premiums continued their downtrend in the week to September 6 as a result of weak spot demand and good availability of imported units.

Fastmarkets assessed the aluminium P1020A premium, in-whs dp Rotterdam, at $430-480 per tonne on Tuesday, unchanged from Friday’s assessment but down from $450-500 per tonne one week earlier.

Several European smelters have announced energy-related production cuts over recent weeks, but premiums continued to drop, with weak demand outweighing any potential supply concerns for now.

“Spot demand for ingot has been weak over the past six to eight weeks, and imports are currently outpacing capacity loss from production cuts. That really shows the breadth of the issue,” one European trader said. “You only have to take a look at German industry data to see how badly demand is being [affected] by rising energy prices.”

Germany’s industrial orders fell for the sixth consecutive month in July, with orders down by 1.1% compared with June, according to figures from the federal statistical office. Year-on-year, orders were down by 13.6% and domestic orders fell by 4.5% in July.

Duty unpaid premiums also moved lower, with reduced offers reported in the market in attempts to attract greater buying interest.

Fastmarkets assessed the daily aluminium P1020A premium, in-whs dup Rotterdam, at $360-400 per tonne on September 6, unchanged from Monday’s assessment, but falling from $380-420 per tonne one week earlier.

“I was speaking to one of my extrusion customers,” a second trader said, “and they told me, ‘Today, it’s not about the premium – we are not focused on price. For now, our focus is how to manage our own production, alongside high costs and rising energy prices. We don’t really care what the premium is’.”

Elsewhere in Europe, the premiums in Italy and Spain trended downward this week with participants returning to the market after their summer holidays.

Fastmarkets assessed the aluminium P1020A premium, fca dp Italy, at $470-500 per tonne on Tuesday, down from $500-550 per tonne one week earlier.

With the summer ending, concerns were now being directed toward energy prices and supplies in the coming winter months.

“On the supply side, there is still plenty of metal around,” a third trader said. “More and more consumers are delaying, diverting or cancelling [bookings for tonnages] where they can. There are plenty of units available from different brands.”

Fastmarkets assessed the aluminium P1020A premium, fca dp Spain, at $470-500 per tonne on Tuesday, down from $520-550 per tonne one week before.

US premium stable — at bottom, some hope

The benchmark aluminium premium in the United States was unchanged in the week to Tuesday, stable for two consecutive assessments for the first time since August 12.

The P1020 premium for primary aluminium is assessed twice a week in the US, on Friday and Tuesday.

The Labor Day holiday in the US came in the middle of the latest assessment period, on September 5, resulting in there being no reported activity in an already subdued spot market.

Fastmarkets assessed the aluminium P1020A premium, ddp Midwest US, at 24.0-25.5 cents per lb on September 6, flat since August 30.

The premium was at its lowest since April 2021, having previously reached a 15-month low on August 19.

“I am a little stunned about how far this slide has gone,” one P1020 buyer said on September 6. Nonetheless, he agreed with Fastmarkets’ assessed range.

A second buyer said on Thursday: “I must believe that [the premium] is close to bottoming out.”

This source, however, a secondary aluminium alloy maker who buys P1020, said that prices for his products had fallen due to a widespread decline in the US aluminium market. “The overall aluminium market is listing lower,” he said.

For now, there was a status quo because of the holiday on Monday, multiple sources said.

“It’s very hard to fight against that, once a number is published,” a P1020 trader said of recent low price index assessments. “However, on a fixed-price basis, we have been achieving higher premiums of 25.5-26.5 cents per lb.”

Deals to be struck at some upcoming industry events this month – including Fastmarkets’ International Aluminium 2022 conference in Barcelona, Spain, September 13-15 – will help to provide direction for the premium, some sources said.

Premiums dip in Brazil

Brazilian aluminium premiums were down in the fortnight to Tuesday, with the recent global bearishness putting pressure on import offers, and more competitive domestic material being enough to meet consumers’ needs, market participants said.

Fastmarkets assessed the aluminium P1020A premium, cif dup Brazilian main ports, at $400-430 per tonne on Tuesday, a decrease of $50-60 per tonne from $450-490 per tonne on August 23, and also its lowest level since $380-410 per tonne on January 11.

New offers to the country were mostly reported within a range of $400-420 per tonne, with a few heard at $430 per tonne. At least one source, however, believed that Europe-origin material would cost more, reaching a premium of $450 per tonne in some cases.

But the fall was not enough to spark more consumer interest for new cargoes. Spot demand has been relatively stable for months and deal-making slowed down due to September traditionally being the month when annual contracts are negotiated.

Clients were mostly resorting to domestic production that was sold at lower prices, market participants said.

Fastmarkets’ assessment of the aluminium P1020A premium, delivered São Paulo region, was $400-450 per tonne on Tuesday, down by $80-90 per tonne from $480-540 per tonne a fortnight before, and at its lowest since $400-450 per tonne on February 8.

Imports were not considered in the assessment because they lost market share throughout 2022 due to record-high premiums. According to market participants, new cargoes would change hands at $500 per tonne or more on a ddp basis.

Domestic P1020 material, on the other hand, was offered at lower prices.

While offers from São Paulo to customers within the state were touching $450-470 per tonne, some deals were reported at $420-430 per tonne. And material from elsewhere in Brazil was changing hands in São Paulo at premiums closer to $390-410 per tonne.

The gaps by product origin were due to different tax regimes that could offer value-added tax credits or deferrals for interstate sales. This meant that smelters outside São Paulo state were able to sell at more competitive premiums.

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