Spot Aluminium Premiums in Asia Rise on Qatalum Shutdown -Trade

HONG KONG/TOKYO, Aug 19 (Reuters) - Spot primary aluminium premiums are up about $10 in Asia as a production halt caused by power loss at the 585,000-tonne capacity Qatalum smelter in the Middle East crimps supplies, traders said on Thursday.

Producers offered spot aluminium at premiums of around $120 per tonne for good Western metal, the benchmark grades for premiums in Asia, traders said, with brokers asking above $120, up from around $110 in June to July.

"We are limiting spot sales mainly because of the Qatalum issue," a supplier source said.

He added the firm is only selling to selected clients and wanted premiums at least $120 per tonne over cash London Metal Exchange prices MAL0.

"The impact from reduced output (at Qatalum) will be felt in the coming six months," said an aluminium end-user in Japan, the top importer of primary aluminium in the region.

Norsk Hydro (NHY.OL: Quote) said last week that the Qatalum smelter, a 50/50 joint venture between Qatar Petroleum and the Norwegian aluminium company, had suffered a sudden shutdown of production due to a power outage, which would delay the smelter's ramp-up schedule.

Continuous electricity supply is a must for energy-intensive primary aluminium production and an unplanned shutdown to cells could led to repairs for weeks or months, Chinese smelter officials said.

A trader at a large Japanese trading house said he expected the shutdown could cause a loss of 100,000 tonnes of metal and that could tigthen supplies in Asia.

SEEING A REGIONAL RISE

Trading houses are building stocks on expectations of higher spot premiums in the coming months, but spot supplies are scarce in the region, traders said.

"We want to buy some Russian aluminium. But there is not much around and supplies in LME warehouses (in Asia) are expensive with the cost over $100," an international trading house dealer said.

Non-good Western metal, including Indian and Middle East, is being offered to China and Taiwan at premiums of $100-$105, compared to below $100 in June to July, traders said.

Despite more than 4.4 million tonnes of LME aluminium stocks <0#LME-STOCKS> on hand, cash aluminium MAL0 has seen an $18 backwardation over the delivery period on Sept 15 MALc1, implying tight supplies given that prompt deliveries are more expensive than those for forward.

But buyers are cautious about paying high premiums considering that the backwardation may spur more stocks going from the LME warehouses and to the spot market, traders said.

Buying from Japan and South Korea, active spot aluminium buyers in Asia, has slowed in the past few weeks, and spot orders from China, whose imports hit a record last year, have been very quiet in the past few months on abundant local supplies, they said.