Initial producer offers for Q1 MJP aluminium at $195/t

At least two producers have extended initial offers for aluminium supply to main Japanese ports (MJP) during the first quarter of 2022 at a premium of $195 per tonne on a cif basis, market participants told Fastmarkets in the week to Friday December 3.

The latest offers are 10.4% lower than the MJP premium for the fourth quarter, which settled at $215-220 per tonne. The premium is paid on top of the London Metal Exchange cash price.

The first-quarter premium for 2021 was settled at $130 per tonne – 40% lower than initial offers for early next year.

A few sources at trading firms have shared that negotiations remained slow, dampened by a weak spot market, low buying interest, a persistent backwardation in LME spreads and the still firmly closed arbitrage into China. No quarterly deals have emerged yet with buyers in no hurry to book volumes.

A consumer said they saw the spot market at $160 per tonne, pointing out that the initial first-quarter offers stood around 20% higher than that, making it “tough” for buyers to accept the latter.

This is despite sources previously expecting initial first-quarter MJP offers to remain firm at $215-220 per tonne, after talk had circulated the market that supply for the coming year is not expected to increase relative to this year.

While traders previously saw Chinese demand as a bright spot in the Asian aluminium market, Chinese futures prices have since slumped from reaching an all-time high at 24,695 yuan per tonne in October. The import arbitrage window for aluminium has been unprofitable since September 28, moving into its largest year-to-date loss per tonne on November 18 at $248.92 per tonne.

“With the arbitrage window shut, there’s no incentive or competition for aluminium P1020A out of Japan, hence the bargaining power for a higher premium is significantly lower. This is in addition to an already slower market the past couple of weeks,” a Singapore-based trader said.

A single trader reported receiving producer offers at $220 per tonne in the same week. Other traders did not report hearing this figure, although traders agreed that difference trading houses may receive different offers early into the negotiations.

Fastmarkets assessed the aluminium P1020A (MJP) spot premium, cif Japan at $170-180 per tonne on December 3, flat for three straight weeks.

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