Japan's spot aluminum premiums were assessed Wednesday at $80-$85/mt plus London Metal Exchange cash CIF Japan, unchanged since June 21 as the market appears to be torn between stable demand and tight futures contract spreads.
Demand outlook for the third quarter has risen from the previous outlook, said Japanese buyers who have decided to increase their purchase volume for the third quarter from producers on annual contracts.
There is no sector clearly outgrowing earlier expectations but there is a spreading feeling of relief as there is no sector that has underperformed either, sources said.
"Demand is holding stable and as we have better visibility for the next month or so, I am feeling more comfortable," said one consumer, who has increased his Q3 purchase volume.
"Japanese domestic demand is stable but we need to be competitive to be awarded sales," said a Japanese trader.
Tight LME spreads were discouraging buyers, added a producer.
Cash-three months were $10/mt in contango Wednesday during Asian hours, up from $6/mt on Monday.
"People don't want exposure to risks and there is no appetite to take positions," said one international trader.
"People will buy less and there will be less trades, and there will be more pressure for lower spot premiums," said the producer.
Several Japanese traders said one international trader was offering at $85/mt plus LME cash CIF Japan.
One Japanese trader said it was for a volume greater than 500 mt for August loading, origins either Australian, South African, Middle Eastern or Brazilian.
The trader said he had rejected the offer and decided not to engage in spot trades due to tight LME spreads.
S&P Global Platts, however, has not been able to confirm with the seller.
The two-tier market structure, comprising of a producer price and a trader price persisted, sources said.
A producer said he was offering to a spot buyer in south Asia $90-$93/mt plus LME cash CIF, following Japanese third quarter contract premiums settlement at this level. The volume was less than 1,000 mt and loading was for either July or August.
The international trader said he would offer $65/mt plus LME cash CIF, if he received an inquiry from a buyer from the same country.
Producers had only monthly production to sell, while traders had abundant stocks, creating a gap in the price levels, sources said.
