Japanese aluminium buyers see Q4 premium at less than $64/mt

Japanese aluminium buyers expect to pay a premium of less than $64/mt plus London Metal Exchange cash prices on a CIF basis, for fourth quarter contract shipments this year, trade and consumer sources told Platts Wednesday. Negotiations over the premium for Good Western (99.7% purity) primary aluminium ingot to be exported to Japan in the fourth quarter started in Tokyo last week. Four traders and rolling mill sources told Platts that their Q4 premium expectations were less than $64/mt on a CIF basis, lower than $68-70/mt CIF for Q3 and the producers' initial offers of $66-67/mt and $74-75/mt CIF for Q4. Sources among buyers said there were differences in what each side referred to as indicators of aluminium supply and demand fundamentals. Producers said strong Japanese macro economic indicators such as GDP growth, the industrial production index, and automobile production figures suggested that demand was firm. A trader said he agreed, adding that he considered market sentiment as another major factor. "Is the metal going to sell, will consumers feel they have the need for it... sentiment determines all these," he said. Meanwhile, a negotiator from the consumer side said there was always a gap between nominal macro economic figures and the real economy. He explained that import volumes would not reflect demand as some buyers on long-term supply contracts could be importing more or less than they needed. Port stocks would not reflect actual supply also for the same reason, he added. Another trader said he considered spot import premiums as the most accurate market indicator, while a buyer suggested domestic premiums. Meanwhile, producers also said during the negotiations that aluminium demand in Asia was robust, as shown in the premiums of $74-75/mt CIF equivalent for some shipments to South Korea in the current quarter, sources said. Trader and consumer sources agreed that demand outside Japan was firm. One buyer, however, told Platts that the $74-75/mt premiums did not accurately represent the market as he has heard a spot deal closed in South Korea recently at $64/mt plus LME cash CIF equivalent. Some consumer and trade sources said that they could skip fourth quarter shipments if both sides failed to reach an agreement. The total tonnage skipped was likely to be more than 1,000 mt, according to Platts' survey. Meanwhile, producers involved in the talks contacted by Platts would not comment.