Global aluminium makers switch to quarterly pricing in Asia

Global producers of aluminium ingots are turning away yearly premiums in favour of quarterly pricing for 2013 term shipments to Asia, to take advantage of spot premiums that scaled records this year, traders said on Wednesday.

Global producers required buyers in Asia to pay premiums, or a surcharge to secure physical metal over the cash London Metal Exchange aluminium price, based on the quarterly main Japan ports (MJP) premium.

The move will make the MJP premium, seen as the Asian benchmark, and which typically reflects spot premiums, more important than previous years.

"The aluminium market premiums have been pushed up so much they are now a significant part of the price that is unhedgeable. For both producers and consumers there is significant uncertainty over where premiums will go," said analyst Nic Brown of Natixis in London.

"It doesn't surprise me at all that they would move to quarterly prices, because you can be a lot more confident you are not going to get destroyed to the upside or the downside than if you set terms for a year," he added.

Some Japanese buyers agreed a term premium of $240 per tonne with Rio Tinto Alcan for delivery in January to March 2013, down from a record benchmark $254 to $255 for the current quarter. The $240 premium is still more than double the $112 for January to March this year.

International trading houses offered yearly premiums for 2013 shipments at about $230 to $250 per tonne for delivery to Hong Kong and mainland China, traders said.

Global producers in previous years offered yearly and half-yearly premiums for term shipments to buyers in Asia. The yearly premiums were at around $98 to $110 to Hong Kong and mainland China this year and about $100 to $110 in 2011.

But premiums in the spot market in Asia reached a record above $260 per tonne in the second half of this year because of low availability of physical metal.