S&P Global Platts CIF Japan spot aluminum premiums held at $95-$100/mt plus London Metal Exchange cash CIF Japan Monday, unchanged since December 21, despite the recent rise in US premiums.
In the past week, two spot trades to Japan comprising over 2,000 mt in total were reported for March loading, at the average of Platts CIF Japan spot premiums.
One Japanese trader suggested buyers could be looking to secure volumes, rather than buying in anticipation of a higher premium.
"Buyers wanting to fix their cost of purchase would not float trades on a formula," said the trader.
Japanese buyers cited a seasonal decline in buying interest as the biggest factor preventing the premium from rising. March is the end of the Japanese financial year, and Japanese companies prioritize stock management.
The LME February and March contract spread, which was flat during Asian trading hours Monday, further discouraged potential buyers.
"For managing stocks, we are looking at the February-March spread. This is a pain," a second Japanese trader said.
A third Japanese trader said: "The spread is inconsistent. February-March, which was wider earlier last week narrowed to $7.50/mt Thursday and to zero on Friday. Why buy spot when spreads are so unreliable?"
The LME March-April spread was $4/mt during Asian hours Monday. Cargoes loaded in Australia, Malaysia and other Asian countries in March would arrive in Japan by the end of April.
"In yen, due to currency swaps, the $4/mt contango shrinks to Yen 100/mt (88 cents/mt), while the April-May spread of $4/mt comes to Yen 300/mt, which is better but not quite a comfortable level to buy," a fourth Japanese trader said.
Japanese buyers also have long-term contracts and since the second-quarter premium negotiations are expected to start later this month, they would rather secure supplies on term contracts, sources said.
Overseas sellers have indicated higher premiums to Japanese buyers, at $100-$105/mt plus LME cash CIF Japan.
One international trader, however, said he has heard such offers being rejected as Japanese buyers were wary of domestic spot premiums failing to catch up with international levels.
"There is no market move," said a producer.
A second international trader said he was not receiving inquiries from Japan either and was focused on sales to other countries in Asia.
South Korean spot demand has picked up and reacted more to the higher US premium, sources said.
South Korean buyers rely more on spot supplies than term contracts, and the country's 1% import duty on aluminum limits purchase options.
Metal from India and Australia are duty-free, due to the bilateral free trade agreement. South Korean demand for Australian metal was stronger than in Japan, as Japanese buyers had options to import from the Middle East and other countries since Japan has no import duty on aluminum, sources also pointed out.
The second international trader said he was unlikely to sell below $100/mt premiums to potential Japanese buyers as the US market was likely to absorb any excess supplies in Asia.
Platts US spot transaction premium rose to a near two-year high of 10 cents/lb on February 6, and stood at 10 cents/lb as of Friday.
Platts European duty-unpaid premiums rose to $90-$95/mt plus LME cash in-warehouse Rotterdam Friday, up $5/mt from the previous assessment.
