Buyers in Japan pay a record-matching fee for aluminium

Aluminium buyers in Japan, Asia’s largest importer, agreed to pay a fee matching a record to producers in the first quarter as demand picks up in China, three executives familiar with the situation said.

The fee for the three months starting in January was set at $255/tonne over the London Metal Exchange cash price, said the executives, who represent buyers and sellers and asked not to be identified because they are not authorised to speak to the media. That matches the record high reached in the fourth quarter of 2012last year.

China, the world’s largest consumer, accelerated purchases of the metal to take advantage of a price drop in the London market to an almost four-year low in June, said partner at research company Market Risk Advisory Company in Tokyo, Naohiro Niimura. Chinese traders also boosted imports as they use shipments to obtain funding through trade financing, he said.

"Chinese demand is picking up and absorbing the surplus in the aluminium market," Mr Niimura said by phone on Thursday.

The record premium adds to costs for fabricators including Tokyo-based UACJ Corporation, the third-largest after Alcoa and Novelis. UACJ, which was created by the merger of Furukawa-Sky Aluminum and Sumitomo Light Metal Industries, had no comment on the fees, said spokesman Ryu Sawachi.

Supply from the Middle East was restricted after production at one of two potlines was halted at a smelter jointly owned by Alcoa and Saudi Arabian Mining Company.

Imports from PT Indonesia Asahan Aluminium ended with the expiration of a joint venture in October, as the Indonesian government agreed to take control of the stake owned by Japan’s Nippon Asahan Aluminium Company.

Indonesia’s ban on ore exports may reduce supply as shipments of bauxite from the nation represents about 12% of global aluminium output, according to the estimate of Goldman Sachs. Bauxite is an ore used for aluminium production.

The Indonesian restriction, aimed at boosting local processing, is set to take effect after January 12 following an endorsement by lawmakers on December 5.

Premiums in Japan more than doubled in 2012 as fees in the US and Europe rallied.

While the surcharge declined this quarter from the three months ended September 30 as the London bourse decided to change rules to speed up withdrawals from warehouses, it has remained above $240 throughout this year.

Japan’s economy expanded for a fourth quarter in the three months through September, led by government spending.

Aluminium-product shipments by Japanese fabricators will probably reach the highest level in three years in the 12 months to March 31, according to the head of statistics at the Japan Aluminium Association, Koji Iida.

On the London Metal Exchange on Thursday, aluminium shed 0.6% to $1,805/tonne, while zinc lost 0.5% to $1,957 and lead gave up 0.4% to $2,134.50.