Japan's aluminum port stocks jump to 44-month high at end Dec

Stocks of primary aluminum stored at Japan's three main port warehouses surged to a 44-month high of 284,000-291,600 mt at the end of December, according to data from local trading houses.

The inventory level was up from 272,800-279,800 mt at the end of November, and also the highest since the end of April 2009, when it stood at 292,000-295,600 mt, traders said.

The stocks comprise primary aluminum ingot, sow, T-bar, alloy, slab and billet products stored at the port warehouses of Yokohama, Nagoya and Osaka. There is no official data on primary aluminum stock levels at these warehouses, so trading companies regularly poll warehouse operators to get an indication of inventory volumes.

According to a poll done by Marubeni, primary aluminum stocks at the end of December stood at 284,000 mt, compared with 272,800 mt at the end of November, a company source said. December inventories comprised 134,500 mt at Yokohama; 134,000 mt at Nagoya and 15,500 mt at Osaka, the source said.

A company source at another trading house, which declined to be named, said stocks totaled 291,600 mt at the end of December, compared with 279,800 mt a month ago. December stocks comprised 134,500 mt at Yokohama; 141,100 mt at Nagoya and 16,000 mt at Osaka.

Traders attributed the growing stock levels to weak demand and a generally quiet market.

"There is not much momentum in the pace of outgoing cargoes ... I cannot single out an industry that is doing particularly badly, just that there is not much activity overall," said the Marubeni trader.

The second source said that Japan's aluminum demand has been slow since the fourth quarter of 2012, and stocks had built up gradually as consumption fell.

Primary aluminum stocks at the end of October stood at 257,800-265,000 mt, Platts reported previously.

But the traders said they were in no hurry to reduce stock levels on expectations that export demand will pick up due to a stronger US dollar.

"Demand in the first quarter was also slow in 2012, but many traders were falling short of metal after spring, so [this year] they want to take precautions just in case this is repeated," said the second trader.

"There is trauma from 2012 when global supply started to tighten in the third quarter, pushing up quarterly contract premiums," said a third trader.

The term contract premiums for the fourth quarter of 2012 surged to $254-255/mt -- basis London Metal Exchange cash CIF Japan -- double premium levels of $115-127/mt in the second quarter.