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Japan aluminum buyer-seller gap widens on LME backwardation spread

Wednesday, Aug 16, 2017

The gap between sellers and buyers in the Japanese aluminum import market widened Tuesday with London Metal Exchange nearby spreads in backwardation during London trading hours Monday, market sources said.

Tuesday was declaration deadline for shipping September cargoes, and a handful of buyers were seeking spot supplies. Two international traders said they heard market talks of offers at $70-$75/mt CIF Japan. The seller may be a trading house, with stocks.

Cash-August spread was $4/mt in backwardation during Asian trading hours Tuesday, compared to flat Monday. Cash-September was $15/mt in backwardation Tuesday, widening from a $4/mt backwardation Monday.

Sources said the cost of keeping aluminum for a month was at least $4/mt and the current spread generated losses of $8/mt or more.

One international trader said his indicative bid was below $70/mt CIF Japan, but he did not receive any offers Tuesday.

"Clearly there are some cheap sellers given the spreads," said a second trader.

Meanwhile, a producer said his indicative offers were $90-$100/mt CIF Japan for September cargo, as he has been able to find buyers outside Japan.

Other producers reported Monday deals into Oman at around $100/mt CIF, as buyers in Oman and other Gulf states sought spot supplies following technical problems at Sohar smelting plant on August 4.

S&P Global Platts assessed spot Japanese import premium at $75-$76/mt plus LME cash, CIF Japan, Tuesday, unchanged from Monday in the absence of offers, bids and trades.

Most market participants were on the sidelines studying the LME spreads. The quiet market was also due to multi-months high LME cash prices above $2,030/mt and summer lull, sources said.

"Specifically, the August 23-September 3 spread is $23/mt in backwardation. What happened in overseas markets Monday?," said a market source.

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