TOKYO, June 10 -- Aluminum buyers in Japan, Asia's largest importer, won a reduction in the fee charged by producers for a second straight quarter as Asian supplies increased on shipments from China and the Middle East.
Premiums for the three months ending Sept. 30 were set at $120 to $122 a metric ton over the London cash price in transactions agreed so far, down from $122 to $124 in the period ending June 30, said three executives involved in the negotiations. The fee was $125 to $130 in the first quarter, the highest level in at least 14 years. The executives declined to be identified because the talks were private.
Aluminum has slumped 14 percent this year, trimming a 45 percent rally in 2009, as Middle Eastern smelters started production and China turned into a net exporter, adding to a global surplus. Demand in Japan improved as the world's second- biggest economy recovered from the worst postwar recession because of export growth and government stimulus measures.
"China shipped surplus metal overseas amid a slowdown in domestic demand, putting a drag on the market," said Tomomichi Akuta, analyst at Mitsubishi UFJ Research & Consulting Co. in Tokyo. "A supply glut also resulted from capacity expansion" and lack of strength in demand from construction, he added.
Supply to Asia rose as Emirates Aluminium Co., a joint venture between Abu Dhabi state-owned investment company Mubadala and Dubai Aluminium Co., increased shipments after starting production on Dec. 1.
Japanese trading company Itochu Corp., which acts as a sales agent for Emirates Aluminium, plans to sell at least 30,000 tons of the metal produced by the smelter in Japan and other Asian markets in the year to March 31, 2011, said Yasuhiro Terashita, a spokesman for the Tokyo-based company.
Emal, as the venture is called, also agreed to supply the metal to Daewoo International Corp. of South Korea, Asia's second-largest importer, according to the United Arab Emirates' news agency WAM. Initial capacity of the smelter will reach 700,000 tons annually by the end of this year.
Qatar Aluminium Co, a joint venture smelter between Norsk Hydro ASA and state-owned Qatar Petroleum, will reach full output in the fourth quarter, Chief Executive Officer Jan Arve Haugan said in April. The smelter, with an annual capacity of 585,000 tons, started output in December and supplies the metal to buyers in Asia and the Middle East.
China, the world's largest producer and consumer, exported 48,546 tons of primary aluminum in April, exceeding imports of 28,987 tons, according to customs data. Outbound shipments surged from 118 tons a year earlier as smelters expanded output on expectation that the global recovery would improve demand.
Rising physical premiums in Europe and the U.S. also gave exporters in China an incentive to sell more overseas, Neil Buxton, managing director at London-based researcher GFMS Metals Consulting, said May 21.
European premiums jumped to $105 a ton, the highest level in at least a decade, for deliveries into Rotterdam warehouses because of a scarcity of metal, Marco Georgiou, an analyst at CRU Group, said May 14.
Japanese buyers pay a fee in addition to the LME cash price to reflect supply and demand and to cover freight and insurance. Some third-quarter transactions are still being negotiated with bids at $119 per ton or below, the executives said.
Imports of refined aluminum by Japan surged 37 percent to 591,326 tons in the first four months from the same period in 2009, data from the Ministry of Finance showed.
Inbound shipments from Australia, the largest exporter to Japan, jumped 41 percent in the four months, outpacing a 13 percent increase in purchases from Russia, the second-biggest supplier. Demand shifted to Australia after Russian shipments were disrupted last year, supporting the premium applied to so- called Good Western-grade aluminum ingot, the executives said.
The premium more than doubled in the past year as lower shipments from Russia and record purchases by China reduced supply in Asia. In the three months to March 31, the fee climbed for a third straight quarter, potentially increasing costs for Japanese fabricators such as Furukawa-Sky Aluminum Corp. The fee was $55 to $58 in the first quarter of 2009.
Aluminum for delivery in three months on the London Metal Exchange lost 0.4 percent to $1,920 a ton at 12:53 p.m. in Tokyo. The price climbed to an 18-month high of $2,494 a ton April 16.