Three Q1 MJP aluminium producer offers heard, but market remains in limbo

Three western aluminium producers have extended offers for first-quarter delivery of aluminium to main Japanese ports (MJP) at premiums of $192, $193 and $195 per tonne cif, according to market sources.

Several Japanese trading firms and consumers have reported starting negotiations with producers for quarterly volumes with bids emerging at $170-175 per tonne. But no deals have been concluded, Fastmarkets heard.

Citing a combination of weak demand, a general unwillingness to carry over stocks into the new year and a firmly shut aluminium arbitrage window into China, buyers appear to be in no hurry to secure sales for the coming quarter.

Fastmarkets understands that the initial offer for first-quarter supply at $195 per tonne heard in the week to December 3 was met with a lukewarm response, with consumers at that time judging the market to be at $170-175 per tonne.

With a wide $20-25 per tonne bid-ask gap, participants expected protracted negotiations and further delays in the conclusion of deals, a situation similar to the fourth quarter of this year, a few months earlier, when negotiation deadlines had been pushed back at least three times.

Quarterly offers and quarterly settlements have in the past year moved upward steadily with each quarter, despite significant pushback during the last quarter.

On the slower negotiations, a veteran Singapore-based trader said, “In the previous quarter, producers [gave little leeway] and deals concluded at much higher than the spot market, which was stretching it for most consumers amid weak demand.”

“To make things worse, those bullish fourth-quarter offers also boosted the spot market despite very little buying during that time. The spot market then sank quickly after the settlement, leaving everyone with high-priced cargoes and not a lot of sales. Buyers are not too happy about that, so they’ll be more cautious this time,” he added.

The first fourth-quarter offer emerged at $230 per tonne, close to 30% higher than the third quarter’s MJP settlement.

But the first producer deals for fourth-quarter supply of aluminium only emerged close to a month later at $215 and $220 per tonne. Market participants reported negotiation deadlines being pushed back at least three times while producers and buyers struggled to find a middle ground amid weak market fundamentals.

While Fastmarkets eventually settled its premium on October 5 for the supply of aluminium to MJP in the fourth quarter of 2021 at $215-220 per tonne over the London Metal Exchange cash price, the spot market on the same day was assessed well below the range, at $185-200 per tonne.

Fastmarkets’ twice-weekly assessment of the aluminium P1020A (MJP) spot premium, cif Japan stood at $160-180 per tonne on Friday December 10, widening downward by $10 per tonne from $170-180 per tonne a week earlier.