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Japan's third quarter Aluminum Premiums Settled at $200-$210/Ton
Edited by : AL CIRCLE
2 min read
Most Japanese aluminum premiums for the third quarter have been settled sharply higher than second-quarter levels due to tightening supply in the Asian market, suppliers told Dow Jones Newswires Monday.
Suppliers and consumers have agreed on premiums between 200 U.S. dollars a metric ton and $210/ton to three-month aluminum prices on the London Metal Exchange compared with premiums of $115-$127/ton in the second quarter, two suppliers with knowledge of the talks said.
Not all negotiations have concluded, with one supplier still holding out for premiums higher than $210/ton, one of the suppliers said.
Premiums have surged in the last three months due to dwindling aluminum supply in Asia, the suppliers said. Freely available metal is hard to come by, partly due to production cuts by smelters supplying Asian markets, but also due to large volumes of metal moving into long-term financing deals in Asia, Europe and the U.S.
"There's been no demand increase [since the second quarter], so the higher premiums are mainly driven by financing deals and production cuts," a second supplier said.
Financing deals became a major feature of the aluminum market when demand fell during the 2008-2009 financial crisis. Producers struck deals with investors, traders and banks by pledging metal to raise cash.
With aluminum demand weak, storage costs low due to low interest rates and forward LME prices trading at a premium to prompt contracts, such deals are once again proving popular.
The high level of canceled warrants in LME warehouses is indicative of large volumes of aluminum on the move between terminals as market participants seek out the best rent deals.
Canceled warrants--a proxy for metal about to leave warehouses--stand at 35.16% of total stock compared with 13.33% at the start of the year.
With so much metal moving into financing deals, physical premiums are likely to continue rising over the next few months, the first supplier said. He added that he's already seeing offers around $220/ton for aluminum in Asia.
While the physical market signals a strong fundamental outlook for aluminum, prices remain under pressure on the LME. Three-month aluminum is trading at $1,993/ton, up 0.5% from its previous settlement but 1.3% lower since the start of the year and 15.6% off its 2012 high of $2,361.50, reached March 2.
Prices have dropped due to macroeconomic jitters in the euro zone, centering on a possible Greek exit from the currency bloc.
Suppliers and consumers have agreed on premiums between 200 U.S. dollars a metric ton and $210/ton to three-month aluminum prices on the London Metal Exchange compared with premiums of $115-$127/ton in the second quarter, two suppliers with knowledge of the talks said.
Not all negotiations have concluded, with one supplier still holding out for premiums higher than $210/ton, one of the suppliers said.
Premiums have surged in the last three months due to dwindling aluminum supply in Asia, the suppliers said. Freely available metal is hard to come by, partly due to production cuts by smelters supplying Asian markets, but also due to large volumes of metal moving into long-term financing deals in Asia, Europe and the U.S.
"There's been no demand increase [since the second quarter], so the higher premiums are mainly driven by financing deals and production cuts," a second supplier said.
Financing deals became a major feature of the aluminum market when demand fell during the 2008-2009 financial crisis. Producers struck deals with investors, traders and banks by pledging metal to raise cash.
With aluminum demand weak, storage costs low due to low interest rates and forward LME prices trading at a premium to prompt contracts, such deals are once again proving popular.
The high level of canceled warrants in LME warehouses is indicative of large volumes of aluminum on the move between terminals as market participants seek out the best rent deals.
Canceled warrants--a proxy for metal about to leave warehouses--stand at 35.16% of total stock compared with 13.33% at the start of the year.
With so much metal moving into financing deals, physical premiums are likely to continue rising over the next few months, the first supplier said. He added that he's already seeing offers around $220/ton for aluminum in Asia.
While the physical market signals a strong fundamental outlook for aluminum, prices remain under pressure on the LME. Three-month aluminum is trading at $1,993/ton, up 0.5% from its previous settlement but 1.3% lower since the start of the year and 15.6% off its 2012 high of $2,361.50, reached March 2.
Prices have dropped due to macroeconomic jitters in the euro zone, centering on a possible Greek exit from the currency bloc.
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