By Yuka Obayashi
TOKYO (Reuters) – Some Japanese aluminum buyers have agreed to pay a global producer a $228 per tonne premium over the benchmark price for shipments from January to March, a 30% increase from this quarter, two said sources directly involved in the conversations.
It is the fourth consecutive quarterly increase and the figure exceeds the $175 per tonne paid in the October to December quarter. It is also the highest premium since 2015, although slightly lower than manufacturers’ initial bids of $230-$260.
Japan is a major Asian importer of the light metal and the premiums for primary metal shipments it must pay quarterly over the London Metal Exchange (LME) spot price set the benchmark for the region.
Negotiations between other buyers and sellers are still ongoing.
The deal comes amid concerns about tighter supply in Asia, after China said it would withdraw a 13% export tax credit on semi-finished aluminum products from December 1.
The move is expected to boost demand for ingots from Asian rolling mills outside China to produce semi-finished products, a source at a global producer said, noting that demand for the primary metal is already increasing.
Strong global alumina prices, which have prompted some producers to cut aluminum output, along with civil unrest in Mozambique, have heightened concerns about tighter global supply and higher premiums, the source said.
The sources declined to be identified due to the sensitivity of the matter.
Russian aluminum producer Rusal said in November it will cut output by more than 6% in response to high global alumina prices and as tight monetary policy and an economic slowdown dampen domestic demand for the metal.
Last week, Australia’s South32 said it has withdrawn its production forecast for its Mozal Aluminum smelter in Mozambique amid post-election civil unrest.
“While Japanese domestic demand remains weak, we settled at $228 due to overseas supply risks and the possibility that protracted negotiations could push prices even higher,” said another source at a Japanese end buyer.
(Reporting by Yuka Obayashi; Editing by Clarence Fernandez and Jacqueline Wong)