Secondary Aluminum Alloy Market Update: D12 Long-term contract price for Q4 to drop significantly

2015/09/03

The ADC12 long-term contract prices for major automotive manufacturers for the 4th quarter will inevitably drop by JPY15-20 kilo from the previous level in the 3rd quarter due to the declining LME aluminum prices and the ill-timed strengthening of the yen.

Chinese secondary aluminum alloy ingot prices, which serve as an indicator for domestic ADC12 prices, have dropped to US$1,730-1,750/t CIF Japan at the moment. This price is common for A Group, B Group and C Group and it is said that such a grouping has become obsolete.


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When US$1,730/t, the lowest price of Chinese ADC for August (,which might be the highest price one month later) is converted into JPY at the exchange rate of 121 yen, CIF Japan port will be JPY220 per kilo. When the pricing for the 3rd quarter was negotiated, the imported secondary aluminum ingot prices were above JPY240 per kilo. The price drop of JPY20 per kilo in those imported ingots is more likely to be the amount of price cut to be conducted for the long-term contract for major automotive manufacturers for the 4th quarter.

Russian AK5M2 also dropped to as low as $1,530/t at the moment. Being converted into JPY at the exchange rate of 121 to the dollar, the CIF Japan port will be around JPY194 per kilo. The demand for AK5M2 has decreased also in countries other than Japan, where lower offer prices have been more common.
gThe market has completely become advantageous for buyersh, a buyer of a domestic major secondary aluminum alloy manufacturer said. At the moment, Russian AK5M2 can be purchased at lower prices if waiting. It will drop below $1,500/t soon.

Russian ADC12 prices are at $1,720/t-$1,730/t for Japan, fluctuating with changes in Chinese ADC12 prices.

As to the outlook for the long term contract for the 4th quarter, gFor the domestic secondary aluminum alloy manufactures, the 3rd quarter was a happy quarter. The exchange rate remained flat around 125 yen to the dollar and order recovery of ADC was seen in domestic secondary aluminum alloy manufacturers because of the higher Chinese ADC12 prices. So, domestic manufacturers kept full-capacity operations and scrambled to collect scraps. But, the domestic secondary aluminum alloy ingot and the imported one will become reversed in the 4th quarter, though the total demand for secondary aluminum alloy ingot may not change in Japanh, the buyer of a domestic major secondary aluminum alloy manufacturer said.

As a result, the volume of the imported ADC12 from China decreased to nearly 25,000t in July, but it may increase to 35,000-40,000t again due to its cheaper price.

In this case, domestic secondary aluminum alloy manufacturers will cut operating rate, decreasing demand for aluminum scraps. Then, lower grade scrap prices which didnft respond to the declining LME prices might drop. Such a downward trend can be expected. The domestic base metal price which has kept above JPY200 per kilo for a long time will drop below JPY200 per kilo and keep around JPY195 per kilo.

(Edited by Sasaki)

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