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Japan 4Q Aluminum Premiums Likely To Edge Down -Traders
Sep 6,2010 13:57CST
industry news

Sep 06, 2010 SINGAPORE (Dow Jones Commodities News via Comtex) --Japan's industrial consumers of aluminum are seeking lower contract premiums for the fourth quarter from global aluminum producers, say traders.

"The market really isn't that tight, so the premiums will probably settle a bit lower than in the third quarter," said a trader at a major Japanese trading house.

Japanese premiums for good western-brand aluminum, which are set on a quarterly basis, have traditionally been regarded as a benchmark for major industrial consumers in the Asian region.

The trader said producers were demanding the same level as the third quarter, which mostly settled at $120 a metric ton over the prevailing London Metal Exchange price.

An agent for a major producer said the consumers were being unrealistic in asking for a discount, noting the recent force majeure at Norsk Hydro's (NHY.OS) Qatalum smelter in Qatar had tightened the market.

Negotiations between industrial consumers of aluminum and producers like Rio Tinto Alcan and UC Rusal (0486.HK) over the premiums are continuing this week, with the deadline for agreement set at Sept. 15.

The agent said consumers were underestimating the leverage producers still had, given relatively low inventories within Japan.

"The customers need the metal and they can't get it anywhere else," he said.

Aluminum stockpiles at Japanese ports totaled 208,200 tons at the end of July, up 3.3% since June and up 20% since July 2009. August data is due next week.

He added that in his opinion, the negotiations could drag on until an aluminum conference in Bahrain which is to commence Sept. 20.

However, another buy-side trader said the negotiations were not as tough as previous quarters, with producers mindful that aluminum was available on the spot market in Japan at premiums below $120 and that Chinese aluminum demand was slack.

"There isn't much of a gap between the two sides," he said.

He added that it was his understanding that Norsk Hydro had still been delivering to Japanese buyers, regardless of the force majeure at Qatalum.

In addition, lower beverage can demand and lower auto production as Japan heads towards winter would also ease the market, he said.

At 0425 GMT, LME three-month aluminum was at $2,167/ton, up $20 since Friday's kerb.

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