Asia aluminium premiums steady ahead of LME rule change

Asian aluminium premiums have been steady ahead of the LME warehousing rule change and with contract talks for 2014 still to start.

“[The market is] still very quiet. We are supposed to start talks for next year’s contracts but it’s an uncertain situation because of the [impending changes to] LME rules,” a trader from Japan said.

The aluminium mating season has moved this year as consumers are adopting a wait-and-see approach before booking any 2014 material.

“We have to settle [annual contracts] by November, so there is still time,” the trader added.

The main Japan ports cif spot premium for aluminium is at the same levels as the fourth-quarter MJP cif of $245-247 per tonne.

“Not so many trades have been done recently as the market is watching for the LME rules,” a second trader source said from Tokyo.

“Maybe next month long-term contracts will be negotiated,” he said, adding that the levels at which future premiums will settle is difficult to gauge as there is a lot of uncertainty.

Total aluminium inventories at the three major Japanese ports fell 7.4% month-on-month and 11.5% year-on-year to 242,300 tonnes at the end of September, according to data by Marubeni Corp.

Total aluminium ingot inventories at the three major Japanese ports saw record high levels of 315,500 tonnes at the end of January.

Total inventories at Yokohama port at the end of September was 109,100 tonnes, down from 122,100 tonnes in August. Nagoya stocks also fell to 117,200 tonnes from 124,500 tonnes in August, but Osaka stocks rose by 1,000 tonnes to 16,000 tonnes in September.

Market participants say the fall in total MJP inventories does not translate to a sudden increase in demand or any major delays in shipments.

“The demand was normal but imports [in September] were in a smaller quantity,” the second Japanese trader said. “We are expecting demand to rise before consumption tax goes up next year, especially from the construction and auto sectors."

Demand so far from the construction sector has been stable but still needs to pick up in the auto sector , he added.

In South Korea, spot premiums are lower compared with spot MJP.

“We have done some deals in the $220-230 per tonne cif levels but the premium depends on the brand and the quality,” a South Korean trader said. “The premium level is low, and the difference between the MJP and South Korea premiums is big,” he added.

The demand/supply situation is different in South Korea as compared with Japan, he said, adding that there is a lot of supply with plenty of stocks in warehouses in South Korea but not much demand.

The last few aluminium tenders in October by South Korea’s Public Procurement Service were won by traders in the $227.9-$235.8-per-tonne range.

Hardly any deals are being reported in China as the arbitrage window hasn’t yet reopened.

Aluminium premiums cif Shanghai were indicated at $240-250 per tonne. Elsewhere in Asia, premiums have held steady. Metal Bulletin’s Singapore and Johor aluminium premiums are at $180-190 per tonne.