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Aluminium premiums in Europe rose during the two weeks to Tuesday January 2, supported by supply pressures from Red Sea disruptions and softer London Metal Exchange spreads, while other global markets were largely stable throughout the holiday period.
European aluminium premiums continued to increase across the board during the two weeks to Tuesday despite the recent lull in trading due to holidays in the region.
Fastmarkets assessed the aluminium P1020A premium, in-whs dp Rotterdam at $190-215 per tonne on Tuesday, unchanged from the previous week, but up $5 from $185-210 per tonne on December 19.
A significant increase in spot liquidity ahead of the year-end supported the premium increase, with several transactions reported at $200 per tonne and above. But participants noted a quieter market into January with many taking time off following the European holidays.
“The market went a bit mad at the end of last year and we saw higher premiums and increased liquidity. But there’s not too much going right now and we aren’t expecting a pick-up in activity until later in the week,” one trader in the region told Fastmarkets.
“There’s an element of supply risk and a supportive [LME] contango, but no great need for spot units desperately. If you want a bargain however, I think it’s too late to buy at the cheap premiums we saw in December. The market has moved on,” the trader added.
The London Metal Exchange aluminium cash/three-month spread was most recently at $44-per-tonne contango.
“There are several supply-side concerns that have potential to add fuel to the fire, but we’ve heard nothing from anyone in the past week. I have no doubt that once consumers return to the market we’ll see a premium jump but for now it’s difficult to justify a real rally while spot demand is slow and people are taking extended holidays,” a second trader said.
Elsewhere, the duty-unpaid premium was also higher, with participants watchful of disruptions to shipments through the Red Sea and the impact on imports into Europe.
“Recent problems in the Red Sea have increased sea freight significantly which should likely be reflected at some point in the premium,” one source noted.
Fastmarkets assessed the aluminium P1020A premium, in-whs dup Rotterdam unchanged at $135-155 per tonne on Tuesday, after rising from $130-155 per tonne on Friday December 29, and compared with $125-145 per tonne two weeks earlier.
Premiums in Italy were also trading higher throughout the holiday period.
Fastmarkets assessed the aluminium P1020A premium, fca dp Italy at $230-250 per tonne, unchanged from the previous session, but up $20-30 from $200-230 per tonne on December 19 following several transactions reported at $230 per tonne and above.
This is the highest premium level in Italy since October 17, 2023.
Participants attributed the rise on December 27 to higher premiums in Rotterdam and supply concerns from the Red Sea disruptions.
But the premium was stable on January 2, with participants reporting quiet market conditions in the new year.
The main Japanese port (MJP) premium was stable during the week to Tuesday amid sustained bearish sentiment.
Fastmarkets’ twice-weekly assessment of the aluminium P1020A (MJP) spot premium, cif Japan was $75-80 per tonne on Tuesday, unchanged on a weekly basis but narrowing upward by $5 from $70-80 per tonne on Friday December 22.
“Demand has been stable in Japan; most [participants] are trying to decrease their volume,” one trader in the region said.
Separately, domestic premiums have trended upward in Japan, according to market sources.
“It is not due to a recovery in demand, but rather a temporary increase [in demand] due to the lower LME price and the stronger yen,” a second trader in the region told Fastmarkets.
“It has been mostly driven by the opening of the Chinese import arbitrage, which saw participants asking for the metal,” a third trader said.
Bearish sentiment remains amid the suspension of production at Daihatsu plants in Japan, limiting the automotive sector’s recovery.
Market participants are also concerned about the potential impact of the earthquake that struck Japan on January 1, with most waiting for more details to be released before assessing as it is still “too early” at this juncture.
Meanwhile, multiple producer deals for the supply of aluminium P1020A to Japan in the first quarter of 2024 were reported to have concluded at $90 per tonne CIF MJP, according to industry sources on Thursday December 28.
In South Korea, aluminium premiums were unchanged amid low liquidity with the festive holiday season depressing buying activity.
“There’s no big buying interest in the South Korean market. Most are waiting for the MJP negotiations to settle,” a market participant said.
Fastmarkets assessed the aluminium P1020A premium, fca South Korea at $110-125 per tonne on Tuesday, unchanged on the week, but widening upward by $5 from $110-120 per tonne a fortnight ago.
Fastmarkets assessed the aluminium P1020A premium, cif South Korea at $90-105 per tonne on Tuesday, unchanged from the previous week, but widening upward by $5 from $90-100 per tonne two weeks earlier.
Elsewhere, Chinese aluminium premiums stayed flat at the end of 2023.
Fastmarkets’ monthly assessments of the aluminium P1020A premium, bonded, in-whs Shanghai and the aluminium P1020A premium, cif Shanghai were stable on Wednesday December 27 at $120-130 per tonne and $100-110 per tonne, respectively.
There was some trading in the first half of the month when import arbitrage window was open for around one week. But the import market became quiet later in the month when the import arbitrage window closed, Fastmarkets heard.
The monthly-average aluminium import arbitrage stood at a loss of $23.71 per tonne in December, compared with a loss of $41.41 per tonne in November.
“It is holiday season now and participants do not have the interest to trade. Some cargo holders might lower their offers to facilitate trade to get cash; but overall, I do not see significant changes on premiums,” a fourth trader said.
Sources also said the recent fast-rising alumina price in China, which has supported the country’s domestic aluminium price, did not trigger higher premiums in China’s aluminium import market.
Premiums in the US were higher during the two weeks to Tuesday, with the market finding support from LME spreads in wide contango as well as rising futures and higher prices for raw materials.
Fastmarkets assessed the aluminium P1020A premium, ddp Midwest US at 18.00-18.75 cents per lb on Tuesday, rising from 17.75-18.50 cents per lb one week earlier, and from 17.50-18.50 cents per lb on December 19.
Tuesday January 2 marked the first day that the US premium was assessed on a daily basis, an increase from the previous twice-weekly schedule.
Prices for LME three-month aluminium futures rose by 2.49% week on week on December 29, the largest week-on-week increase among base metals prices on that day.