The first quarterly aluminum premium contract for a more than 1,000 mt/month shipment over January-March was closed at $83/mt, plus London Metal Exchange cash settlement average of the shipment month, CIF Japan, Wednesday.
A Western producer reported the deal and a major Japanese end user confirmed later. The contractual premium is 14.4% lower than the Platts Q4 assessment of $97/mt, and close to the $83-$85/mt in Q1 2019.
The quarterly CIF Japan aluminum premium or MJP pricing talks, which are part of the annual contract signed recently, involve over 10 parties, including three major Western producers and several Japanese consumers and traders.
Prior to the deal being known, market participants reported offers, which began to emerge last week, at $92/mt,$95/mt and $85/mt by three producers and indicative bids around $80-$85/mt.
Several Japanese traders said an unconfirmed deal was concluded at $82/mt against an $85/mt offer over Monday to Wednesday. A different source heard $82/mt was a consumer's counter offer to producers Tuesday. The producer source involved in the talks said $82/mt was not a done deal later Wednesday.
"$82/mt seems to be fair value," said a Tokyo-based trader, citing spot market levels and continuous backwardation on the LME.
Other Japanese traders said the deal seemed low from a producer's point of view. But sources said Q1 premiums are usually seasonally lower and they expected next year's Q2 premiums to be over $100/mt.
Other international traders expected Q1 contracts to be closed earlier as the Japanese primary aluminum market has an oversupply and soft demand.
The LME aluminum official cash close was settled at $1,802/mt Tuesday. The cash-to-three-month spread was in $8.5/mt backwardation as of Tuesday's close.
The Platts spot Japanese import premium was assessed at $75-$85/mt plus London Metal Exchange cash, CIF Japan, Wednesday, reflecting most tradable levels for cargoes loading in 15-60 days and priced on January basis.
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