Japan: Negotiations for aluminium premiums get delayed on Russian supply uncertainty

The quarterly negotiations for Japan’s aluminium premiums among overseas aluminium ingot producers, Japan’s domestic consumers and major trading companies on long-term contracts for April-June’22 are expected to take longer than usual due to uncertainty over supply from Russia.

The talks will likely get delayed as producers have not made any concrete offers with the Ukraine crisis and sanctions on Russia being intensified. With no visibility on future supplies from Russian producer Rusal, Japan’s aluminium producers are claiming a 41% quarter-on-quarter (q-o-q) increase in premiums.

One manufacturer offered a premium of $250/t, an increase of $73/t. Producers have adopted a wait-and-watch attitude amid growing uncertainty over aluminium ingots given the chaotic situation in Ukraine. Also, there is a possibility that the situation will be assessed and negotiations held in the short term.

Negotiations on long-term contracts will start after the producers have offered a price, which is conventionally the time when the offers from the various producers are already roughly in line with each other.

It is believed that the Russian military aggression and sanctions against Russia by Western countries as well as the supply-demand crunch and concerns from Russia are causing delays in the offers made by producers.

The aluminium premium to Japan has not been offered above $200/t since the Oct-Dec period last year. In the previous quarter, global stagnation in automobile production and other factors pushed down producers’ offers, but they have once again spiralled.

Outlook

In addition to the global uncertainty, the premium is expected to remain at a high level due to the widening price gap with European and US premiums and long-term disruption in maritime logistics.

Aluminium producers want to raise Japan’s premiums for the next quarter on possible supply disruptions from Rusal, but buyers are seeking lower levels due to cheaper spot premiums.

Note: This insight has been published in accordance with an article exchange agreement between SteelMint and Japan Steel Daily.