The overall trading sentiment in the global overseas primary aluminum spot market remained muted this week, with thin transaction activity. Only sporadic small orders for rigid demand were concluded, while bulk purchases were scarce. Hit by the traditional off-season for downstream consumption, together with mounting inventory pressure and tight capital liquidity among sellers, quotations softened across regions. Spot premiums in major Asian areas kept falling from recent highs. Meanwhile, the US Midwest DDP aluminum premium trended downwards, dragging the global overseas spot market lower in tandem.
I. Review of Spot Premiums by Region
According to SMM data, after rallying steadily in Q2, premiums for primary aluminum across Asian regions hit an inflection point from July, with the downward momentum accelerating this week.
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Southeast Asia Spot premiums in Thailand continued to decline. Downstream processors of profiles and packaging aluminum products entered the seasonal off-season with lower operating rates. Factories adopted a hand-to-mouth purchasing strategy with no advance stockpiling. Traders were eager to clear stocks and offered lower prices, pushing market prices further down. Export quotations from Indonesia also weakened amid strong bargaining sentiment from overseas buyers, making export transactions harder to secure.
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South Korea Spot premiums in South Korea fell markedly this week. Demand from downstream auto parts and construction aluminum sectors softened. End-users held sufficient raw material inventories to sustain production and showed limited willingness to purchase.
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Japan (CIF Japan MJP Primary Aluminum Spot) Japan’s MJP spot premiums retreated from high levels, and transactions were limited to rigid demand. Spot prices stood notably below the Q3 QMJP long-term contract benchmark, and the gap between spot and contract prices persisted. Downstream manufacturers remained on the sidelines, expecting further price declines. Large-scale restocking has yet to materialize, capping any rebound potential for spot premiums.
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United States (US Midwest DDP Primary Aluminum Premium) After hitting this year’s peak, the US DDP premium embarked on a downward trend. Arrivals of overseas primary aluminum shipments picked up, lifting market supply availability. Traders faced greater pressure to offload cargo, leading to gradual declines in spot premiums.
Market Outlook
In the short run, the overseas downstream consumption off-season is unlikely to reverse quickly, and overseas primary aluminum spot premiums are expected to stay under pressure.
Two key variables merit close monitoring going forward. On the one hand, if production resumption in the Middle East falls short of expectations, or ongoing conflicts disrupt primary aluminum supply, coupled with consistent inventory drawdowns in LME warehouses, overseas spot premiums may stage a recovery. On the other hand, continuous exports of new primary aluminum capacity from Indonesia and Vietnam will add market supply. Combined with macro headwinds weighing on non-ferrous metals, spot premiums face risks of further declines.
