Q4 MJP aluminium talks face further delay - sources

Fourth quarter negotiations for aluminium into Main Japanese Ports (MJP) between producers and market participants have been extended for another week, with negotiations now expected to conclude on Friday September 17.

This marks the second postponement for the fourth-quarter negotiations, after the first postponement to September 10 failed to reach a conclusion.

Market players had already expected protracted negotiations this quarter because producer offers first emerged at close to 30% higher than the cif MJP premium for the third quarter, which settled at $172-185 per tonne.

Prior to the negotiations, most of the market had also expected higher fourth-quarter offers, given new export duties being levied on Russian-origin aluminium effective August 1 and recurring supply curbs in China following Beijing’s focus on green transition policies and its political determination to reduce coal usage, both of which have effectively reduced supply.

Despite already expecting even higher offers in the last quarter of 2021, no buyers were immediately ready to accept producer offers at $210, $230 and $250 per tonne.

Demand for aluminium products in Japan remained sluggish, with automotive production dragged down by a shortage of semiconductor chips and a lack of marked improvement in the construction sector.

Furthermore, news that two trading houses were concluding fourth-quarter deals at $185-190 per tonne also dampened the momentum of negotiations. Fastmarkets could not independently verify the deals at the time of publication.

Although in a protracted deadlock, some market players remain confident that deals will eventually conclude in producers’ price expectations, given steady global premiums and the re-opened import arbitrage window into China.

Fastmarkets calculated the profit on the aluminium import arbitrage at $27.58 per tonne on September 10 compared with $17.68 per tonne a week earlier.

With the arbitrage window fully opened, traders expect Chinese import appetite to compete away quality Good Western metals out of Japan, requiring Japanese buyers to boost their bids.

Offers into China on a cif Shanghai basis were reported to have climbed to $200-205 per tonne early last week, up from $180-200 per tonne in the week to September 3. The most recent deal heard in the week to September 13 was at $225-235 per tonne cif Shanghai, due for shipment in October.

“The pressure is on [Japanese buyers]. The longer they wait, the wider the arbitrage gets. It won’t be surprising if offers trek higher,” a Singapore based trader said.

Meanwhile, MJP aluminium stocks fell by 11.1% in July after four consecutive months of increases, signalling some strength in Japan’s July demand for aluminium products. Aluminium units in LME warehouses have also been gradually declining since reaching a year-to-date high of 1.97 million tonnes on March 19. Stocks stood at 1.32 million tonnes on September 10, compared with 1.34 million tonnes a month before. They are down by 33.1% from the year-to-date high.

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