This year, and in part due to the consequences of the Covid-19 pandemic, market dynamics have shifted, and fewer participants engaged in the MJP quarterly contractual discussions, with some choosing not to take part at all.
Fastmarkets believes that there may be a longer term move away from contractual volumes in favor of an increase in spot-market activity.
In the interests of capturing the maximum level of contractual liquidity in the near term, and potentially in the longer term, Fastmarkets is inviting feedback on a proposal to limit the criteria for settling the quarterly price to the following:
- A minimum total quarterly transaction volume of 30,000 tonnes reported to Fastmarkets MB.
- Confirmed deals from multiple market participants which include at least one producer, one consumer and one trader.
Only when these criteria have been met and the majority of the market have agreed a quarterly benchmark will Fastmarkets publish the premium.
In line with this, Fastmarkets proposes to update and simplify its fallback procedures as follows:
- Should the MJP benchmark fail to be concluded by the 15th of the first month of any quarter, Fastmarkets MB will publish a benchmark based on the following principle;
- If less than 30,000 tonnes of transacted volumes have been reported, Fastmarkets MB will publish an assessed benchmark based on deals reported as well as bids and offers, giving a weighted preference to reported transactions.
The current methodology states that, in order to publish, Fastmarkets MB requires the following conditions to be met:
- A minimum total quarterly transaction volume of 30,000 tonnes reported to Fastmarkets MB
- Confirmed deals from at least one consumer
- Confirmed deals with at least three producers
- Confirmed deals from traders.
Fastmarkets currently uses a set of fallback procedures if the above criteria are not met, in order to publish a benchmark assessment no later than the 15th of the first month of the quarter in question.
The current fall-back procedures are as follows:
- If transacted volumes of at least 30,000 tonnes have been reported, but only one consumer has confirmed deals with fewer than three producers, or if the reported business is only between traders and producers, Fastmarkets MB will publish a benchmark based on deals and discard the contribution requirements.
- If less than 30,000 tonnes of deals have been reported but deals with at least three producers and by one consumer are confirmed, Fastmarkets MB will publish a benchmark based on the confirmed deals and discard the minimum transacted volume requirement.
- If less than 30,000 tonnes of transacted volumes have been reported and fewer than three producers or one consumer have confirmed deals, Fastmarkets MB will publish an assessed benchmark based on any deals reported as well as bids and offers, giving a weighted preference to reported transactions.
The consultation period for the proposed amendment will run for six weeks from October 20 and end on December 1, 2020. Any changes, subject to market feedback, would be implemented for the MJP premium settlement for the first quarter of 2021.
Fastmarkets invites comment from market participants to determine whether amending the conditions for the conclusion of the MJP quarterly premium would more accurately reflect the benchmark premium in an accurate and timely way.
Fastmarkets acknowledges that some of our prices are used for the settlement of spot and term contracts. Therefore, we invite market participants active in these markets to contribute to the consultation on this proposal.
To provide feedback on this, or if you would like to provide price information by becoming a data submitter to the assessment, please contact Karen Ng or Alice Mason by email at pricing@fastmarkets.com. Please add the subject heading FAO: Karen Ng/Alice Mason, re: Aluminium P1020A (MJP) delivery window or FAO: Karen Ng/Alice Mason, re: MJP data submission.
To see all of Fastmarkets’ pricing methodology and specification documents, go to https://www.fastmarkets.com/about-us/methodology.
To see the current methodology for the aluminium P1020A (MJP) quarterly premium, cif Japan, go to https://www.fastmarkets.com/Media/Files/PRA/FMV2/pdfs/methodology/Price-specifications/FM-MB-Aluminium-MJP-Quarterly.pdf.
