Reuters reported that some term premiums for primary aluminum shipments to Japan for January to March were agreed at USD 112 per tonne to USD 113 per tonne marking the lowest level in Q6 and the fourth straight quarterly drop.
A trader said that aluminum term talks began 3 weeks ago between Japanese buyers, such as trading houses and aluminum mills and suppliers including mining giants BHP Billiton and Alcoa Inc.
Term premiums to Japan have fallen about 13% after hitting historic highs of USD 128 to USD 130 in January to March this year and the deals struck so far for the Q1 next year represented a drop of about 4% from the USD 116 to USD 118 agreed for the current quarter.
The trader said that we agreed on some of our deals for the Q1 at a slightly lower level from the previous quarter at around USD 112 to USD 113. Many other traders said that they were still waiting for suppliers' offers to come down from USD 113 to USD 115 to around USD 110. They had expected premiums to fall below USD 110 due to an uncertain outlook for domestic demand.
One end user said that the level is still high from our point of view, which is that demand in Japan is slack and premiums in other parts of Asia are generally weak. Still, traders have also cautioned that high premiums in Europe and the United States would make suppliers reluctant to slash Japan bound premiums even if physical supply of the metal in Asia was not tight with production from the Middle East hitting the market and China seeing abundant domestic supply.
The trader said that suppliers may also be split between those who can ship aluminum to Europe and those who can't. In the meantime, Japanese buyers are not in dire need of the metal. So, it's an issue of the overall balance.
Some Japanese traders said that they were not in a rush to settle as their current aluminum holdings allowed them to turn to the spot market to make up for any shortages of the material. Japan which must buy virtually all the metal it needs, imports about 2 million tonnes of primary aluminum every year.
The country's annual export growth slowed for an eighth straight month in October due to a stronger yen and a central banker warned that major economies face growing downside risks, suggesting external demand could weaken further. The premiums are over the London Metal Exchange cash price and include insurance and freight costs.
While prospects for domestic demand for aluminum used in products ranging from computers to planes, are growing uncertain inventories at LME warehouses remain tied up by financial deals which have slowed flows of supply into the market.
A commodities analyst at a Japanese research firm said that "Aluminum is not in tight supply based on data, but actual availability is distorted by financing deals on LME warehouses or expectations for the launch of exchange-traded products backed by base metals such as copper and aluminum.”
（Sourced from Reuters）
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