Reuters
Alcan wants Japan Q2 aluminium premium hiked to $132
Edited by : AL CIRCLE
2 min read
Rio Tinto Alcan is asking Japanese buyers to increase the premium they pay on primary aluminium shipments to $132 per tonne for the April-June quarter, two sources involved in informal talks between the two sides said on Wednesday.
That compares with premiums of $112-114 paid over the London Metal Exchange cash price in the current quarter. Buyers pay a premium in addition to the LME cash price to cover freight and insurance and to reflect regional supply and demand.
The demand was made in a letter sent ahead of the official start of negotiations next Monday. The talks are set to continue for the coming three weeks.
Japanese buyers are resisting such a large rise, citing uncertainty over domestic demand, particularly as the yen's strength is curtailing exports of domestic carmakers.
"Demand from the electronics sector is also weak, and we feel their view that reconstruction demand from the March 11 earthquake will emerge later this year is too optimistic," a source at a large mill said.
Shipments of aluminium products for the car industry fell 7.4 percent to 260,774 tonnes in 2011, according to an industry body.
Japan is one of the biggest importers of aluminium, although its consumption of around 2 million tonnes per year accounts for only about 5 percent of global demand.
Australian and U.S. producers are bullish about the prospect of raising premiums after recent smelter shutdowns.
Top U.S. aluminium producer Alcoa said last month it would slash output at two Spanish smelters and shut its Portovesme smelter in Italy, while Norwegian producer Norsk Hydro plans to idle a third of its output at a plant in Australia.
The moves have helped benchmark LME aluminium prices gain some 10 percent this year.
Producers also cited the low likelihood of banks releasing aluminium stocks held through financial deals, a source said.
Such financial deals -- in which traders buy physical metal and simultaneously sell forward at a profit, while striking a warehouse deal to store it cheaply in the interim -- have recently become more profitable as the difference between nearby and forward prices has widened.
The deals have tied up most of the record 5 million tonnes of London Metal Exchange stocks.
Japan's aluminum buyers, including trading houses and aluminium mills, and suppliers such as BHP and Rio Tinto, will start official negotiations next week.
That compares with premiums of $112-114 paid over the London Metal Exchange cash price in the current quarter. Buyers pay a premium in addition to the LME cash price to cover freight and insurance and to reflect regional supply and demand.
The demand was made in a letter sent ahead of the official start of negotiations next Monday. The talks are set to continue for the coming three weeks.
Japanese buyers are resisting such a large rise, citing uncertainty over domestic demand, particularly as the yen's strength is curtailing exports of domestic carmakers.
"Demand from the electronics sector is also weak, and we feel their view that reconstruction demand from the March 11 earthquake will emerge later this year is too optimistic," a source at a large mill said.
Shipments of aluminium products for the car industry fell 7.4 percent to 260,774 tonnes in 2011, according to an industry body.
Japan is one of the biggest importers of aluminium, although its consumption of around 2 million tonnes per year accounts for only about 5 percent of global demand.
Australian and U.S. producers are bullish about the prospect of raising premiums after recent smelter shutdowns.
Top U.S. aluminium producer Alcoa said last month it would slash output at two Spanish smelters and shut its Portovesme smelter in Italy, while Norwegian producer Norsk Hydro plans to idle a third of its output at a plant in Australia.
The moves have helped benchmark LME aluminium prices gain some 10 percent this year.
Producers also cited the low likelihood of banks releasing aluminium stocks held through financial deals, a source said.
Such financial deals -- in which traders buy physical metal and simultaneously sell forward at a profit, while striking a warehouse deal to store it cheaply in the interim -- have recently become more profitable as the difference between nearby and forward prices has widened.
The deals have tied up most of the record 5 million tonnes of London Metal Exchange stocks.
Japan's aluminum buyers, including trading houses and aluminium mills, and suppliers such as BHP and Rio Tinto, will start official negotiations next week.
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