The overseas spot primary aluminum market faced overall downward pressure this week, with premiums falling across all regions. Driven by multiple factors including the traditional overseas consumption off-season, fading concerns over tight global aluminum supply, weak end-user spot demand, and pressure from trade arbitrage, spot aluminum quotations in major overseas regions kept sliding amid muted trading activity.
In terms of pricing performance, premiums in core overseas markets generally declined week-on-week compared with last Friday, July 3. The US Midwest DDP primary aluminum premium edged down from 110.25 US cents per pound to 109.75 US cents per pound, remaining under bearish pressure. Asian markets trended lower in tandem:
- CIF Thailand P1020A dropped from USD 345/MT to USD 335/MT;
- FCA Korea P1020A fell from USD 366/MT to USD 335/MT;
- CIF Korea P1020A retreated from USD 350/MT to USD 319/MT;
- Japan MJP ingot spot premiums plunged sharply from USD 380/MT to USD 355/MT. Spot premiums across Asian overseas aluminum markets cooled off markedly.
Regional Breakdown
The Japanese spot market stayed broadly weak, with end manufacturers only restocking for immediate operational needs without bulk pre-purchases. As market expectations of tight global aluminum supply continued to ease, buyers became increasingly reluctant to accept higher offers. Meanwhile, arbitrage trades emerged during the week: traders accumulated spot cargoes at low prices and captured spreads against long-term contracts, further weighing down spot transaction prices and dragging Japan’s spot rates lower.
The US market also faced headwinds amid its traditional consumption off-season and feeble downstream end-user demand. With overseas primary aluminum restarts and new capacity set to ramp up in the second half of the year, expectations of looser supply gained traction. Downstream buyers remained cautious with purchasing, accepting lower prices and pushing regional premiums downwards.
South Korea and Thailand saw synchronized softening in market conditions with subdued buying sentiment and consistent cuts to market offers. Traders are eager to liquidate inventories, yet downstream purchasers slow down procurement with minimal buying interest. Lopsided bargaining power pushed offer prices steadily lower, exerting continuous downward pressure on regional premiums.
Outlook
Overall, overseas aluminum markets are stuck in the seasonal consumption off-season, alongside growing expectations of ample global aluminum supply. Lacking solid support from physical demand and robust buying interest, overseas spot primary aluminum premiums are likely to maintain weak volatile momentum in the short run, with further downside risks lingering.
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