Q4 MJP aluminium premium settles at $88/t; up 14% from Q3

Fastmarkets’ benchmark premium for the supply of aluminium to main Japanese ports (MJP) in the fourth quarter of 2020 has settled at $88 per tonne on top of the London Metal Exchange cash price.

The latest aluminium P1020A (MJP) quarterly premium, cif Japan is 14.3% higher than the third-quarter benchmark of $75-79 per tonne but is 9.3% lower than the fourth-quarter 2019 premium of $97 per tonne.

Over 50,000 tonnes of deals were reported to Fastmarkets by at least one side of the trade, from producers, consumers and traders for October to December delivery. 

Most market participants settled their quarterly negotiations at $88 per tonne, with the majority of deals collected by Fastmarkets being at this level.

There were some deals reported below $88 per tonne early in the negotiations, including the first deal concluded by an international trader at $83 per tonne on August 28.

Yet the majority of producers sold at $88 per tonne after the first deal was concluded at this level in early September.

Producers resume high tonnage deals
Since the start of 2020, MJP quarterly premiums had been falling, partly due to waning demand in Japan. The global pandemic Covid-19 exacerbated the situation in the second and third quarters, with a few consumers heard to be canceling or postponing orders because domestic demand was so weak.

The poor demand in the third quarter meant deals averaged just 500-1,000 tonnes per month and the total concluded tonnage was below the usual minimum tonnage.

But when negotiations started for the fourth quarter, automotive firms in Japan had announced a return to full production which pushed up domestic demand for aluminium and, subsequently, premiums.

After this, both consumers and producers alike returned to quarterly negotiations willing to negotiate for higher volumes, where each trade averaged 1,000 tonnes or above per month.

“I did feel that this would be a strange year where Q4 premiums would be a seasonal high, mostly because in the previous two quarters the quarterly premiums were so low,” a trader said.

In August, Japanese carmakers posted record sales in China causing demand to surge and influencing negotiations for the quarterly benchmark.

“Even when producers try to take supply away from Japan, I would say that there are many people still interested to book business in Japan which is what pushed premiums up,” a second trader said.

The contango in LME spreads and pick-up in demand also helped spot premiums. Fastmarkets’ latest assessment of the aluminium P1020A (MJP) spot premium, cif Japan was at $85-95 per tonne on October 2, the highest level since more than a year ago on September 2, 2019.

Meanwhile, the domestic market was beginning to boom, with premiums there heard at above $100 per tonne for October delivery, according to market participants.

“Domestic market demand is really good now, because not only is the automobile production up, the sales of autos have also recovered,” a third trader said.

Alice Mason in London contributed to this article.