TOKYO: Japanese spot aluminum premiums slipped below $100/mt plus London Metal Exchange cash, CIF Japan, Monday for the first time in six years, five months after hitting an all-time high of $425/mt plus LME cash CIF Japan.
Platts assessed spot premiums of primary aluminum imported into Japan at $90-$100/mt plus LME cash, CIF, main Japanese ports Monday, June 15, down from $90-$120/mt last Friday and the lowest since being assessed at a premium of $110-$120/mt on June 8, 2009. The premium hit an all-time high of $425/mt on January 20.
One Japanese consumer, seeking to buy less than 300 mt of primary aluminum ingot for loading any time over July-September, reported selling interest at $90/mt plus LME cash CIF Japan.
The consumer, seeking Australian, South African or Middle East-origin cargoes, did not buy, saying the longer he waited, he more he could negotiate down premiums.
Spot sellers in Asia said premiums were stabilizing outside of Japan in June after four months of freefall.
One Asian trader said he had heard trades by other parties at less than $100/mt plus LME cash CIF Japan. But he and another Asian trader maintained they would reject bids at $90/mt plus LME cash CIF Japan.
High local inventories were weighing on the Japanese market, with LME cash and three-month contract spreads flipping to backwardation intermittently triggering occasional selloffs since January, market sources said.
Japanese stocks remain high at over 500,000 mt at three main port warehouses alone. But some markets outside Japan reacted positively to the LME contract spreads swinging to $40/mt contango last month.
However, Japanese traders said the impact of the LME contract spread swinging back to contango had been limited in local spot trades in Japan.
“There are less aggressive selloffs in Japan. A while ago, buyers would bid lower and lower and sellers would follow down, but these days, sellers come back to say ‘not this low.’ Sellers are able to hold on to stocks a while longer thanks to the contango spread,” one Japanese trader said.
While the positive impact was clear in Europe, where spot premiums have rebounded, the Japanese spot market is struggling.
European consumers returned to the market as the contango spread made them confident about holding stock, while in Japan, high stocks continue to pressure domestic prices down.
“Unless there is a clearly different trend in the market such as a decrease in imports, a decrease in stocks, there will be no change,” a second Japanese trader said.
Traders said it would take a clear sign of improvement in the market for Japanese trading houses to replenish stocks rather continuing to sell down.
A Japanese consumer last Tuesday awarded a tender to buy 500-1,000 mt of primary aluminum ingot at Yen 228-230/kg ($1,838-$1,840/mt) delivered to central Japan in August. Two traders estimated the import premium at $60-$65/mt.
The second Japanese trader reported 200-300 mt spot sales into Thailand last week at $110-$125/mt plus LME cash CIF Bangkok/Lame Chaebang for June-July loading of Australian, South African and Middle East origin material.
European spot premiums stood at $110-$130/mt plus LME cash in-warehouse Rotterdam, duty unpaid, last Friday, up from $80-$100/mt a month earlier.
