Japanese aluminum buyers negotiate 33% drop in Q4 premiums

It is also lower than producers’ initial offers of $115-$133.

Japan is Asia’s biggest importer of the light metal and the premiums for primary metal shipments it agrees to pay each quarter over the benchmark London Metal Exchange (LME) cash price set the benchmark for the region.

The latest quarterly pricing negotiations began in late August between Japanese buyers and global suppliers, including Rio Tinto Ltd and South32 Ltd.

The lower premium reflected a series of delays in the recovery of automobile manufacturing because of a global shortage of semiconductors.

“With repeated delays in the production recovery by automakers and increasing stockpiles, buyers have sought lower premium levels than our initial offer,” a source at a producer said.

Higher local inventories also underline an oversupply situation and have fuelled concerns of a global economic slowdown, a source at an end-user said.

Aluminum stocks at three major Japanese ports rose 9.8% to 399,800 tonnes at the end of August from 364,000 tonnes at the end of July, according to Marubeni Corp. That was the highest since November 2015.

“Spot deals that have been done at below $100 a tonne in recent weeks also forced the producers to make a compromise,” a source at a trader said.

The sources, who were directly involved in pricing talks, declined to be identified because of the sensitivity of the discussions.

(By Yuka Obayashi; Editing by Edmund Klamann and Christian Schmollinger)