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Japan aluminum premium flat so far, a week after Sohar incident

Friday, Aug 11, 2017

S&P Global Platts assessed spot CIF Japan premium flat at $74-$76/mt CIF Japan Thursday, unchanged from Wednesday, while market looks for signs of impacts of Sohar smelter incident a week ago.

There were no offers or bids reported as the market waited for news from Sohar Aluminium in Oman, after production was interrupted following an "incident" on August 4. The smelter hasn't elaborated further.

Market sources said the questions were: has the smelter resumed normal operations, and destination of Sohar metal -- how much was going to Europe, Japan, the rest of Asia, to the US and to LME warehouses.

Japan has imported 13,756 mt, South Korea 2,147 mt and Thailand 7,604 mt over January-June this year from Oman, according to the respective countries' customs data. Sohar is the sole aluminum smelter in Oman.

If the smelter fails to return to normal operations by the end of the year, up to 200,000 mt of supplies from Australia and other regions would be diverted to Sohar customers to cover for the output loss, estimated one international trader.

A producer source said he believed most of Sohar production was going to Europe rather than Asia. African production would cover the Sohar metal in Europe, while Australian exports to the US would decrease to cover for the requirement of Sohar customers in Asia, he estimated.

Indications were heard in a wide range of $70-$100/mt plus LME cash CIF Japan, reflecting the uncertain near-term outlook.

Potential sellers said indicative offers were at $90-$100/mt plus LME cash CIF Japan, as market may tighten. News of output cuts in China and the rising US premium will also contribute to higher premiums, they said.

Potential buyers said indicative bids were at $70-$75/mt plus LME cash CIF Japan, saying market is supported at $70-$75/mt currently, adding that there was no room for a further downslide but no clear bullish signs either.

The most recent spot trade took place this week after the news of Sohar incident. It was at $75/mt plus LME cash CIF Japan, for 500 mt for September loading, between two international traders.

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