Japan aluminum buyers, producers move closer in Q1 talks on lower offers

Tokyo (Platts): Japanese aluminum buyers and producers moved closer in the negotiations on first-quarter premiums, as some producers made second offers, sources involved in the talks said Friday.

Producers first offered $435-440/mt plus London Metal Exchange cash, CIF Japan, up from $420/mt plus LME cash CIF Japan for the current quarter.

The second offers by two producers were at less than $435/mt plus LME cash CIF Japan, but higher than buyers' bids at $390/mt, said buyer and seller sources.

Two end-users and one trader said they would not consider any premium above $390/mt.

One buyer, however, suggested eyeing settlements above $390/mt: "Sellers and buyers are moving closer. We must start talking in terms of realistic levels." One Japanese buyer had decided to skip term shipments for the whole of Q1 due to high stocks in Japan. Port stocks stood at 378,000-385,000 mt at the end of November, the highest since Platts started to take records in September 2004.

But Japanese buyers acknowledged that some companies need Q1 term shipments, especially value-added products such as slab used for automotive sheets.

Japanese extruders and rolling mills in the talks are able to produce billet and alloys from ingots as they have their own cast house and other facilities.

But it is difficult to find a substitute for slab, notably that from one Canadian smelter, consumer sources said. The Canadian slab is used for making automotive sheets, sources added.

"The smelter is a certified supplier to various automakers, and the emerging smelters in the Middle East do not have parallel track records. Some Japanese automakers do not allow a switch in supply sources. Automotive aluminum sheet demand is seen to be growing fast in the US, so the high premiums in the US impact the negotiations," said one Japanese consumer source.

Two Japanese consumers said they were not buying Canadian slab. One said: "Producers said premiums in the US are high, but we are negotiating the Japanese premiums. In Japan, the market has slowed, we have high stocks."

The negotiations, that started around November 20-21, were in a deadlock as producers asked for a hike due to rising premiums in the US and Europe, while Japanese buyers were seeking lower premiums because of high stocks.

Courtesy : Platts