Asian aluminum premiums stabilized over the past week

Asian aluminum premiums have stabilized over the past week as market participants look to next year’s negotiations amid growing expectations of a fall in quarterly premiums.

"Japan and (South) Korea are quiet, but we have no spot (material) to offer," a source at a top producer told AMM sister publication Metal Bulletin. "We have started discussions (for the first quarter of 2013) and there is a customer expectation of a fall, but not to the reported levels of $220 to $230 (per tonne)."

Asian premiums edged down slightly last week.

Metal Bulletin’s Main Japanese Port (MJP) spot premiums held steady at $230 to $250 per tonne, with participants reporting no demand for the light metal.

"The demand is weak in Japan, and premiums should go down for next year," a Japanese trader said. "U.S. and European premiums are strong, so we don’t know which way next year’s negotiations will go."

The Japanese housing sector, which is usually very quiet in the January-to-March period, might be better next year, she said.

Aluminum premiums in South Korea are "frozen, with no deals at all," a South Korean trader said. "End-users have started to reduce their stock levels as the fiscal year ends in December."

The last aluminum tender by South Korea’s state-run Public Procurement Service for 4,000 tonnes of primary aluminum ingots at the end of October settled at premiums lower than in the last tender.

The Public Procurement Service bought 2,000 tonnes of western aluminum ingots from LG International Corp. for a premium of $247 per tonne and 2,000 tonnes of non-western material from Glencore International Plc at a premium of $222 per tonne c.i.f.

In its previous tender, the agency bought western material at $249 per tonne and non-western material at $224 per tonne c.i.f.

Premiums for aluminum in the London Metal Exchange’s Singapore-listed warehouse were unchanged this week at $170 to $180 per tonne. In Johor, Malaysia, they were at $170 per tonne, the same level as last week.

"It has been very quiet here and no deals have taken place," a Singapore-based physical trader said.

"No one is budging on the premiums (in Singapore) and it’s not a liquid market as no one needs to buy material (from LME warehouses)," a second Singapore-based trader said. "No one is fully sure where next year’s talks will start, and it’s hard to tell right now whether premiums will fall."

Imports of the light metal by China might resume on an improved arbitrage.

Metal Bulletin’s three-month aluminum arbitrage was at $166 per tonne Monday, while the cash arbitrage was at $135 per tonne.

"With the arbitrage improving in China, some inquiries are coming back," another Singapore trader said.

Premiums in Shanghai were last at $150 to $200 per tonne c.i.f., but no deals have been reported over the past few weeks.