Tokyo (Platts) Negotiations for Good Western grade primary aluminium supply contract for the second quarter of 2007 have turned into a staring contest as sellers continue to hold back from posting firm offers, sources close to the talks said.
The Q2 premium talks began in Tokyo last week ended March 2. Producers have not made firm premium offers in the second week of talks, Japanese buyers said.
Two traders said producers were selling mostly at around $76-78/kg CIF Japan plus London Metal Exchange cash prices, unchanged from the Q1 premiums. There were also producers indicating higher as well as those suggesting lower than the Q1 premiums. One trader said the range of both buying and selling indications were at "$70-79/mt".
Sources involved in the talks said producers saw the aluminium consumptions in Q2 rising from Q1 due to summer demand. They also suggested Japan's economic growth this year supporting the increases in the aluminium consumptions.
Meanwhile, consumers generally agree that the material demand is not weak. But the LME price conditions seem to be discouraging their buying interest. One consumer said there is no strong demand driver and consumers constantly see the threat of substitutions on the back of the high LME aluminium prices. The cash to three months LME contracts in backwardation has also urged the traders and consumers to keep their stocks as low as possible, a trader said.
Talks are not making any progress as both sides take a wait and see attitude in the absence of a clear disagreement. There are differences in their premium ideas. "We are engaged in a staring contest, where both sides are just stubborn about their positions," one source said.
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