Aluminium premiums in Europe remain well-supported; Japanese spot reference edges lower

Elsewhere, the spot premium in Japan narrowed lower in response to growing bearish sentiment while the US market was quiet following the Labor Day holiday on Monday.

Europe aluminium premiums well-supported

European aluminium premiums remained well-supported in the week to Tuesday, with the duty-unpaid premium in Rotterdam edging higher on continued reports of tight regional supply.

Fastmarkets assessed the aluminium P1020A premium, in-whs dup Rotterdam at $270-295 per tonne on Tuesday, unchanged from the previous day’s assessment, but rising from $265-295 per tonne one week earlier.

The midpoint of the premium, at $282.50 per tonne, is now at its highest level since the end of September 2022.

“There’s still a sense of unease over safety of stocks for unpaid metal in Rotterdam,” a trader in the region said.

“It’s one of the most sellers’ markets you could possibly have, and fundamentally comes down to a lot of Russian [material] being yanked out of the system. People still have green ambitions, but the available pool is now much slimmer. I wouldn’t be surprised to see the spread between [duty-paid] and [duty-unpaid] premiums continue to narrow,” they added.

“The European market is also better insulated against tighter [London Metal Exchange] spreads than the [United States’] for example because of the lower inventory environment,” the same trader said.

The LME aluminium cash/three-month spread was most recently at $17.50 per tonne contango, with participants still keeping a close eye on the October/November 2024 spread which was most recently at $9 per tonne backwardation.

“There’s not enough metal coming into Europe currently to avoid destocking,” a second trader said. “You cannot replace your tonne cheaply so premiums in Europe have to be high in order to attract more units.”

The duty-paid premium was stable on Tuesday amid quiet spot market conditions, as participants continued to note some tightness to nearby availability despite slow consumer demand.

Fastmarkets assessed the aluminium P1020A premium, in-whs dp Rotterdam at $330-355 per tonne on Tuesday, unchanged from the week prior.

“It’s been a very quiet week on the sales side, and the European economic outlook is poor. But premiums are finding support at current levels due to low stock and high costs to bring metal in,” a third trader said.

“The market is funny right now. It’s relatively tight on a physical base, but if you look at end demand everyone is quite depressed. You have to take the weaker demand sentiment but also factor in how many tonnes have been taken out of the market,” a fourth trader said.

“I wouldn’t want to be short any premiums, because when demand comes back, its likely to do so pretty aggressively,” they added.

In Italy, the premium was unchanged in the week, following the recent holiday period in the region and while many participants across Europe prepare to meet in Athens next week for Fastmarkets’ International Aluminium Conference.

Fastmarkets assessed the aluminium P1020A premium, fca dp Italy at $380-400 per tonne on Tuesday, unchanged since July 30 amid quiet spot market conditions.

Asian aluminium market narrowing

The main Japanese port (MJP) aluminium premium narrowed downward in the week to Tuesday amid bearish sentiment.

Fastmarkets’ daily assessment of the aluminium P1020A (MJP) spot premium, cif Japan was $160-170 per tonne on Tuesday, unchanged from Monday, but down on the high end from $160-172 per tonne a week ago.

“[Demand for aluminium from] the automotive sector was relatively unchanged from the previous week,” a Asia-based trader said.

“Some lower deals were heard in the week, it might be when the contango narrowed or turned to backwardation, but it is unlikely now that the spread has reversed back to a wider contango,” a second Asia-based trader said.

A narrower contango or backwardation can indicate bearish sentiment and increase selling pressure for cargo holders, according to sources.

Negotiations for the supply of aluminium in the fourth quarter to MJP began with an initial producer offer at a premium of $185 per tonne, 7.6% above the settled third-quarter premium at $172 per tonne.

Elsewhere, stable yet weak demand and low liquidity kept aluminium premiums in South Korea unchanged.

Fastmarkets assessed the aluminium P1020A premium, fca South Korea at $175-185 per tonne on Tuesday, unchanged from a week earlier.

Fastmarkets assessed the aluminium P1020A premium, cif South Korea at $160-170 per tonne on Tuesday, unchanged from the previous week.

United States aluminium price update

Market participants in the US market saw the premium for P1020 aluminium material in a wider range at the start of the month.

Fastmarkets assessed the daily aluminium P1020A premium, ddp Midwest US at 19.50-21.50 cents per lb on Tuesday, widening from 20-21 cent per lb the week prior.

The spot market continued to remain sluggish, with the US markets closed on Monday in celebration of Labor Day.

One reason for a lack of activity was that the premium of the P1020 material is too low to incentivize sellers, according to a U trader source.

“Prices look low for those with inventory to get rid of,” he said.

Individual market participants that Fastmarkets spoke to reported seeing the premium in a wide range amid the summer lull.

“The lack of activity is preventing the market from having a clear picture of what’s happening,” he said.

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