SINGAPORE--Japanese aluminum consumers look set to win a concession as major producers may cut term premiums in the second quarter, a trader at a major Japanese trading house said Thursday.
The premium over the London Metal Exchange cash price for second quarter shipments will likely be between $71 to $73 a metric ton, cost-insurance-freight, Japan, down from $76-$78 in the first quarter, the Tokyo-based trader said. Traders said almost all major producers have agreed to the new premium, and only a few have yet to concede the cut.
Japan is Asia's largest net importer of primary aluminum.Alcoa (AA), Alcan (AL.T) and BHP Billition (BHP.AU) are among Japan's biggest aluminum suppliers.
The second quarterly negotiations stretched out longer than normal as major aluminum producers tried to keep premiums unchanged, in the face of strong protests from Japanese consumers.
"Some customers almost canceled their orders," the trader said.
Japanese consumers based their negotiations on the falling domestic aluminum premiums in February, just before talks began at the end of February.
Domestic premiums fell in February after Japanese consumers postponed their orders because of high spot market prices, the trader said. Cash prices at the time were much higher than the forward prices on the LME, and the drop in physical buying pressured domestic premiums.
The spread on the LME cash to three-month contract is at $15.27 Thursday, down from $83 in mid-February. The LME 3-month contract was last traded at $2,720/ton, while the cash contract was at $2,735.75/ton.
Because producers want to sell their stocks to capture the current backwardation spread, despite the fact that it's narrowed, consumers were able to get them to cut the premiums, the trader said.
Aluminum stocks at the main Japanese ports of Yokohama, Nagoya and Osaka stood at 245,900 tons at the end of February, down 12.6% from a year ago, reflecting the tighter aluminum market in 2007. On month, stocks rose just 1.1%.
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