FORECAST: Trump’s announcement on US aluminium import tax seen supporting Q2 MJP premiums
US President Donald Trump’s decision to enact a 10% tariff on aluminium imports is expected to give suppliers stronger grounds to ask for higher premiums for second-quarter aluminium supply to main Japanese ports (MJP), market participants said.
Trump confirmed on Thursday March 1 that he will impose a 10% tariff on aluminium imports into the United States as a result of the Section 232 investigation into the national security impact of such imports. He is expected to sign the tariffs into order next week.
“The Q2 MJP offers are very high compared to Q1. We would like to negotiate for $120 but that could be difficult now due to the Section 232 results which will cause US premiums to rise,” one Japanese buyer said.
Offers for second-quarter MJP supply are so far at $133-135 per tonne, up about 30% from the first-quarter settlement of $103 per tonne.
While some had described the offers as “high” and “expensive”, there are others who think these offers are “fair” after Trump’s announcement.
“Given the tight situation now, the offers are fair. Our price idea now is $125 [per tonne],” another buyer said.
“I wouldn’t be surprised if the suppliers decide to revise their offers upwards,” one Asia-based trader said.
Metal Bulletin assessed the spot MJP aluminium premium at $95-110 per tonne on a cif basis on February 27, unchanged week on week.
Rest of Asia
Spot trading in the Asia aluminium market remains muted this week because businesses were still gradually restarting after the Lunar New Year holidays (February 15-21), but most are expecting higher spot premiums in the region in the near term in line with higher US premiums and second-quarter MJP premiums.
“The recent US news will give suppliers confidence to hold up their premiums,” the trader said.
Spot premiums in Asia are expected to track US premiums higher in the short term but deals and transactions could be limited in the coming week because many are likely to wait for more detailed announcements from the US, a second Asia-based trader added.
But sources noted that any increase in Asian spot premiums in the near term could just be a knee-jerk response because in the mid- to long-term, more Chinese semi exports are likely to be diverted from the US to other regions, including Asia.
The aluminium premium in South Korea was at $98-120 per tonne on a fca basis on February 27, unchanged week on week.
In China, reactions were relatively muted.
“The impact on Shanghai Futures Exchange aluminium prices from the announcement was limited because the expectations of import taxes have already been factored into prices,” China’s Galaxy Futures said in a report late on Friday Shanghai time.
But a Shenzhen-based trader said the futures market was probably a little “disappointed” with Trump’s announcement because more severe measures were expected.
A 10% tariff on all imported aluminium will unlikely add much downward pressure on SHFE aluminium prices to improve the export arbitrage further, he said.
The SHFE-London Metal Exchange arbitrage had widened in the past months, making it profitable for Chinese suppliers to export semis amid expectations of strict measures by the US against Chinese exports.
The SHFE’s most-traded April aluminium contract closed at 14,340 yuan ($2,258) per tonne on Friday March 2, down 95 yuan from the previous day’s close.
Echo Ma in Shanghai contributed to this report.