TOKYO- The premium for aluminum shipments to Japanese buyers for January to March was set at $177 per ton, down 20 percent from the previous quarter, as local spot premiums and overseas prices eased, six sources involved in pricing talks said on Wednesday.
That is down from the $220 per ton paid in October-December and marks a first quarterly drop in six. It is also lower than the initial offers of $193-$195 per ton made by producers.
Japan is Asia’s biggest importer of the light metal and the premiums for primary metal shipments it agrees to pay each quarter over the benchmark London Metal Exchange (LME) cash price set the benchmark for the region.
The premiums rose to $130-$220 a ton in 2021 from $79-$88 in 2020 as global demand picked up from a pandemic-induced slump and container shortages caused shipping delays and freight rate hikes, while output in top producer China slowed due to power disruptions and the government’s environment policy.
“But the increase last year was overdone,” a source at a Japanese trading company said.
“The drop for this quarter reflected lower spot premiums in Japan and elsewhere in Asia which tracked falls in the US and European markets and were caused by discounts made by international traders to trim their inventories at the end of their financial year,” he said.
A slow recovery in automobile output also weighed on the demand outlook, another source at a Japanese end-user said.
Japanese automakers are struggling with persistent parts and chip shortages, including Toyota Motor 7203.T, which said it would suspend production at five domestic factories in January.
However, metal prices and overseas premiums are on the rise again after two smelters cut production late last month due to high power prices, fuelling concerns about potential shortages.– Reuters
