Primary Aluminum Premium to Japan to Surge by US$ 7-9 for July-September

Premium for primary aluminium shipment to Japan in July-September is likely to increase by US$ 7-9 to US$ 120-122 per tonne when the premiums were set high against European and U.S. re-rollers while supply and demand balance of primary aluminium ingot is internationally tight. Some of Japanese re-rollers will procure scheduled volume of ingot along car output recovery while some will reduce the purchasing volume since their operations would lower by Japanese power companies’ electricity supply regulations.

Australian major smelter initially offered the premium hike by US$ 15 to US$ 127-128 for July-September shipment to Japanese users. Other smelters offered US$ 122-125. Japanese ingot users showed strong disapprovals against the wide-range hike when the re-rollers’ operations and domestic demand were downed by Japan Earthquake.

The premium was raised by US$ 7-9 finally reflecting the strong demand in emerging countries of Southeast Asia and South America, or continuous supply tightness in spot ingot market along financial trading, and high premiums in Europe and the U.S.A.

Japanese aluminium re-rollers forecast their can material production would downturn in July while increase for car components. Meanwhile, some re-rollers will lower operating rate during July-September when electricity supply will be regulated. One major re-roller source commented the company halves primary aluminium procurement for July-September compared with April-June.

According to Japan Aluminium Association, Japanese aluminium re-rollers’ operating rate averaged 78.9% in April, down by 7.9 points year-on-year. The operating rate represented y/y minus for 2 months in a row. Domestic demand for rolled aluminium products largely decreased mainly from car industry after the major earthquake.

The operating rate for extrusions downed by 1.9 points to 73.5%. The operating rate represented first y/y minus since November 2009 despite of the stable demand from construction market. The operating rate for flat products lowered by 12.2 points to 82.5%.