Primary Aluminium Smelters and Japanese Users Agree in Record High Premium

Overseas primary aluminium smelters and Japanese primary aluminium users almost agreed in the quarterly premium hike by US$ 80-90 to US$ 200-210 per tonne for July-September compared with April-June. The premium hit the record high when primary aluminium supply is globally tightening and the spot premium is strongly surging worldwide.

One Japanese trader source concluded the price negotiation was totally dominated by smelters this time. Offshore smelters have downsized or closed high-cost smelting plants since 2011 due to continuously low market price of primary aluminium. Ingot supply has decreased despite of the globally strong demand. Spot supply and demand balance is quite tightening.

Spot premium of primary aluminium is sharply rising to reflect the situation. The current premium is 10.0-10.5 US cents per pound in North America or $ 220-245 per tonne including tariff ($ 155-170 without tariff) in Europe. Both of the spot premiums are the record high.

Banks continue financial deals of primary aluminium though the spot premium is steeply surging. Primary aluminium inventory accumulates approximately 4.9 million tonnes at warehouses designated by London Metal Exchange. Several trader sources suggest there should be 4-5 million tonnes of primary aluminium inventories separately at other warehouses. It seems difficult for the spot ingot users to draw the stock out when 80% of the inventories are financially dealt.