The third-quarter contract premium for aluminum imports into Japan has been agreed upon at $119/mt plus London Metal Exchange cash CIF Japan by three producers and two Japanese buyers, sources involved in the negotiations for the premium said on Friday.
Around 15 Japanese buyers and five overseas suppliers are in negotiations for the Q3 contract premium that started in end-May.
The deals were for over 3,000 mt of aluminum ingots in total to be shipped to Japan in Q3, the sources said.
The Q3 premium is 7% less than Q2's premium of $128/mt plus LME cash CIF Japan.
Market sources also said that deals at $118/mt plus LME cash CIF Japan were done, but S&P Global Platts could not confirm that.
Two Japanese buyers said they were aiming at $115/mt CIF Japan or below and that $119/mt CIF Japan was not acceptable.
The initial producer offers were at $120-$128/mt plus LME cash CIF Japan, down from Q2's levels due to weakness in the US spot premiums.
Producers told Japanese buyers that the downside is limited as China is expected to cut production in the second half of 2017, which would tighten global supplies.
Japanese buyers said China was increasing exports of manufactured and semi-finished aluminum products to Asia, reducing demand for ingots.
Nothing was conclusive from these discussions as there was no sign of output cuts yet, Japanese sources said.
"There is no tightness at all," said a producer, who was not participating in the negotiations.
China's exports fluctuate, depending on LME prices and how they compare with the Shanghai Futures Exchange prices, and may not accurately reflect supply-demand fundamentals, pointed out some sources.
China produced 10.97 million mt of refined aluminum in Q1 2017, up 10% year on year, according to China Non-ferrous Metals Industry Association.
As of end-April, the country's total aluminum stock was more than 1.2 million mt, which was a record high, the association also said.
China's exports of unwrought aluminum and aluminum products in May rose 9.5% year on year to 460,000 mt, preliminary data released on June 8 by the China General Administration of Customs showed.
