TOKYO, Sept. 10 -- Japan, Asia's second-largest aluminum importer, agreed to increase the fee it pays to producers by at least 53 percent to the highest in 14 years as surging Chinese demand saps regional supplies.
The premium, a benchmark for buyers in Asia, will climb to $115 a metric ton over the London Metal Exchange cash price in the three months to Dec. 31, four industry executives involved in talks said, quoting deals reached so far. That would be the highest since Japan began mostly purchasing through long-term contracts in 1996, said the people, declining to be identified as the talks are private.
Aluminum climbed 23 percent this year as China, the world's biggest producer and consumer, became a net importer under a 4 trillion yuan ($586 billion) stimulus plan that shielded the country from the global recession. Increased fees may boost costs for Japanese fabricators such as Furukawa-Sky Aluminum Corp. and Kobe Steel Ltd.
"Strong Chinese demand is the largest factor boosting purchasing costs for base metal users in Japan," Kazuhiko Saito, chief analyst at Tokyo-based commodity broker Fujitomi Co., said today by phone. "The situation is tough as Japan's domestic demand is still weak, making it hard for manufacturers to pass higher raw material costs to consumers."
Japanese buyers pay a fee in addition to the LME cash price to reflect local supply and demand and to include freight and insurance costs.
The premium, applied to so-called Good Western-grade ingot, rose as high as $75 a ton this quarter, the first gain in a year, as Japan's economy emerged from the worst postwar recession. Some deals for the next quarter are being still negotiated with offers at $120 or above, the people said.
Aluminum for delivery in three months on the LME fell 0.1 percent to $1,894 a ton at 5:05 p.m. Tokyo time. The metal touched a seven-year low of $1,279 a ton on Feb. 24.
Reduced Chinese exports spurred Asian buyers such as South Korea and Taiwan to boost purchases from Australia, South America and Africa, increasing the premium.
China's imports of refined aluminum soared 1,481 percent from a year earlier to 1.1 million tons in the seven months ended July 31, as stimulus measures boosted demand from builders and carmakers and the government stockpiled the metal.
Aluminum exports from China fell by 77 percent to 9,147 tons in the same period, according to the custom's data.
Asian supplies also became scarcer this quarter because of reduced shipments from Russia. Output by United Co. Rusal, the world's biggest aluminum producer, fell 10 percent in the first half to 1.98 million tons as the company joined Alcoa Inc. and Rio Tinto Group in reducing production to curb a slump in prices.
Rusal halted some Japanese deliveries this quarter after agreeing in June to sell as much as 1 million tons to Glencore International AG, the Swiss commodities trader that owns 9.7 percent of the Moscow-based company, Dow Jones reported June 16.
Diane Collier, a spokeswoman for Rio Tinto, said by phone today that the company could not comment on premium negotiations. Ryu Sawachi, spokesman for Tokyo-based Furukawa-Sky, said the company couldn't confirm premium levels.
Aluminum demand in Japan improved as government incentives boosted sales of hybrid cars and electric appliances that consume less electricity. Japan's shipments of aluminum rolled products rose to 166,673 tons in July, the highest level in nine months, according to the Japan Aluminium Association. Compared with a year earlier, shipments dropped 20 percent as demand from the construction sector remained weak.
Sumitomo Light Metal Industries Ltd. will shut its aluminum extrusion plant near Tokyo in March, the Tokyo-based company said Sept. 2, citing a protracted slump in demand from builders.
Aluminum stockpiles in Yokohama, Nagoya and Osaka ports fell to 174,200 tons at the end of July, according to Japanese trading house Marubeni Corp. That was the lowest level since the company began compiling data in June 1995.