March 12, 2018 / 10:16 AM / 10 months ago

Some Japanese aluminum buyers agree second-quarter premium at $129/ton, up 25 percent from first quarter: sources

TOKYO (Reuters) - Some Japanese aluminum buyers have agreed to pay a premium of $129 per ton for shipments from global producers in the April to June quarter, reflecting soaring U.S. spot premiums, two sources directly involved in the pricing talks said on Monday.

The new premium is 25 percent higher than the $103 per ton premiums in the current quarter. The premium is the highest in three years and marks the second quarterly increase in a row.

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

The quarterly pricing negotiations began last month between Japanese buyers and global producers, including Alcoa Corp, Rio Tinto and South32 Ltd, with initial offers for premiums ranging between $132 and $135 a ton.

The increase reflects a surge in U.S. spot premiums to the highest in almost three years after U.S. President Donald Trump flagged a 10 percent import duty, as buyers sought to secure metal before higher costs come into force.

Trump pressed ahead last Thursday with the import tariffs but exempted Canada and Mexico and offered the possibility of excluding other allies, backtracking from an earlier “no-exceptions” stance.

U.S. spot premiums for Comex aluminum reached to around 18.5 cents a pound ($408 a ton) last week, highest since April 2015.

“We struck deals at $129 per ton with three producers last week after securing that level below their initial offers,” a source at a Japanese trading house said.

A source at another trading company said his company agreed to $129 per ton for some of its contracts, but other buyers said they were still negotiating as fallout from the U.S. tariffs was not entirely clear.

On Friday, Trump said he has spoken with Australian Prime Minister Malcolm Turnbull and that they are working on an agreement so Australia would not be subject to U.S. tariffs on steel and aluminum.

“Global suppliers which have smelters in Australia may raise their offers once the exemption is confirmed as it is by far more profitable to bring metals to the U.S. than to Asia even after paying transportation costs now,” the first trading house source said.

“But we may see higher supply in Asia as some metals to be shut out from the U.S. may head to Asia, which could weigh on premiums,” a source at a fabricator said.

Reporting by Yuka Obayashi; Editing by Joseph Radford and Tom Hogue

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