Higher premiums for Japanese buyers is a positive sign for aluminum

06 March 2023 165
Higher premiums for Japanese buyers is a positive sign for aluminum

Aluminum prices are sliding down as China's growth target for 2023 is weak. GDP has been confirmed at the National People's Congress (NPC) at around 5%, which is lower than most economists had expected.

In addition, there were no new large-scale economic stimulus packages.

Global aluminum manufacturers suggested premiums between $125 and $145 per ton for Japanese buyers on primary metal shipments in April and June. This markup is 45-71% higher than in the first quarter, as reported by five sources involved in negotiations.

Such provisions will represent the first premium hike in six quarters, with the highest level recorded since the end of 2022. It reflects the manufacturers' belief that aluminum demand from automakers is likely to grow.

Japan is the largest aluminum importer in Asia, and premiums for metal shipments are the benchmark for the region. Premiums in the U.S., Europe and other Asian countries have also been rising due to sustained demand, limited supply, and pending automobile production recovery.

China's limited economic growth is likely to put some indirect pressure on aluminum in the mid-term. But increased premiums indicate that demand is growing at the moment, thus having a greater impact on aluminum prices. Apart from Japan, higher demand for the metal is also seen in China. This momentum from the country’s economic reopening will support aluminum prices further. 

Based on the technical analysis, aluminum is wedged within a short-term downtrend and a medium-term uptrend. The metal's price is now closer to the lower boundary. Manufacturers are confident that demand for the metal is strong as they have been raising premiums for buyers. That’s why there is a high probability that aluminum prices will rebound to the upper limit.

The growth target may be the upper boundary of the trend near the level of $2440. Stop-loss could be placed when it goes below the rising trend, corresponding to the price of $2350. Stronger movement will be observed at the exit of the forming figure on the technical analysis.


Aluminum is likely to rise:

Take profit – 2440

Stop-loss – 2350

This content is for informational purposes only and is not intended to be investing advice.

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