Japan Primary Al Premium Downs Marginally for July-September

Japanese primary aluminium buyers concluded negotiation with offshore suppliers to reduce the premium on price on London Metal Exchange to around US$ 120 per tonne for July-September from US$ 122-125 for April-June. Japanese buyers sought US$ 7-8 down while the reduction was narrower when the suppliers resisted the wide down citing tight supply in USA and Europe. The premium is in narrow range at US$ 120 for 60-70% and US$ 121-122 for the balance, according to Japanese trading companies.

The suppliers in Australia and South Africa offered same premium for July-September as April-June under tight supply in Europe and USA while Japanese buyers sought less than US$ 120 per tonne premium. The suppliers accepted certain down due to Asian supply condition during the negotiation but they succeeded to keep more than US$ 120 premium. Japanese buyers won lower premium for 2 quarters in a row but they recognize suppliers are winner for the talk.

Japanese industry sees no tight supply in Asian market. During the negotiation between Japanese buyers and offshore suppliers, the premium hit US$ 103 per tonne at tender by Korea Public Procurement Service due to oversupply in South Korea. The supply looks loose when Middle East suppliers increase the supply for Southeast Asia and Russian supply gets stable while the inventory in Shanghai increases.

The premium keeps high in North America and Europe due to tight supply. World aluminium inventory reaches 10 million tonnes including stock registered to LME but Japanese trading firm source sees the supply is still tight with limited availability of stock in North America and Europe under demand recovery.

The premium is uncertain for October-December when the market could be vulnerable to speculating transactions. A trading firm source said speculators can easily make money by buying cash ingot and by selling future even with cost for interest and storage.