The premium for aluminium shipments to Japanese buyers for April to June was set at $82 per tonne, down 1.2% from the preceding quarter, four sources directly involved in the pricing talks said, highlighting fears that the coronavirus crisis will hit demand.
Japan is Asia’s biggest aluminium importer and the premiums PREM-ALUM-JP for primary metal shipments the country agrees to pay each quarter over the London Metal Exchange (LME) cash price set the benchmark for the region.
The latest premium is down from the $83 per tonne paid in the January-March quarter and marks a third straight quarterly drop and the lowest premium since the October-December quarter in 2016.
It is also lower than the initial offers of $98-$105 made by producers.
“We have struck all deals at $82 a tonne by early this week,” a source at an aluminium fabricator said on Thursday.
“Our production has not been impacted by the pandemic yet, but we may need to cut output as demand for automobiles and home electrical appliances looks fairly bleak,” he said.
Manufacturing activity fell across much of the world in March, as sharp slowdowns in Germany and Japan overshadowed a modest improvement in China. New orders in the United States slumped to an 11-year low, implying the worst is still to come.
“All Q2 deals were done at $82 a tonne which was below our initial offer,” a source at a producer said on Wednesday.
“We had to compromise as expectations for demand fallout have grown among buyers since the coronavirus has spread so rapidly outside of China in March,” he said.
The sources declined to be named due to the sensitivity of the talks.
The latest quarterly pricing negotiations began in late February between Japanese buyers and global producers, including Rio Tinto, and South32 Ltd.
More than 935,000 people have been reported infected by the novel coronavirus across the world and 46,906 have died, according to a Reuters tally.
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