Russian aluminum producer Rusal has offered Japanese buyers a $460/mt premium to London Metal Exchange cash, CIF Japan, for fourth-quarter shipments, Japanese traders said Wednesday.
Rusal is asking for a 13% increase from the current quarter's $400-408/mt plus LME cash, CIF Japan. The $460/mt premium would be a record high.
Rusal's marketing official declined to comment on the premium offer.
Rusal sent an email to Japanese trading houses and end-users Tuesday proposing the $460/mt premium for Q4, citing strong global demand, Japanese traders said.
Rusal is the first among overseas producers to make an offer for Q4 contract shipment terms to Japanese buyers.
The premiums are for more than 50,000 mt/month of primary aluminum ingot exported to Japan from Russia, Australia, South Africa and the Middle East over October-December 2014.
A $460/mt premium would not reflect the market and the Japanese buyers would be seeking lower premiums, the Japanese traders said.
Japanese buyers typically place their bids after three other major producers -- Rio Tinto Alcan, BHP Billiton and Alcoa -- make their offers. Two producers among the three said they planned to place their offers next week.
Japanese buyers said a decrease in Q4 premiums from Q3 was unlikely as spot supplies had remained tight all year. However, they said the increases should be moderate on the back of the recent rebound in LME prices.
Japanese traders forecast Q4 LME three-month prices at $1,950-2,300/mt.
The LME July average was $1,967/mt, while the June average $1,868/mt.
Three Japanese traders put their Q4 premium ideas at $400-435/mt.
"If you look at Japan, the numbers have been flat, nothing moving," one trader said.
Platts spot premium assessment have remained flat since July 1 at $400-408/mt plus LME cash CIF Japan, due to an absence of spot deals. Producers had no spot cargoes to offer, while Japanese traders have reached out to aluminum stored at LME warehouses in Asia.
But some Japanese buyers may need to increase their volumes for Q4 from Q3. "Demand outlook for October-December is better than the current quarter, thanks to brisk automotive and cansheet," a rolling mill source said.
A second Japanese trader said he was seeing around $415/mt for Q4.
"Smelters should be able to make profit with this premium," he said. Another trader from the same firm said he forecast LME prices at roughly $2,050-2,100/mt for Q4.
Japanese trade and end-user sources echoed this point. "The fall in LME stocks would give support to LME prices. Why pay premiums above $400/mt?" a second end-user source said.
Global LME stocks stood at 4.8 million mt this week, down from 5 million mt on July 1.
Aluminum production costs are estimated to be $2,300/mt or lower, Japanese buyers said.
A Rusal marketing official said the decline in the LME warehouse stocks showed the marked was in deficit and that premiums should reflect tight supplies as well as strong demand.
