S.Korea PPS pays sharply lower aluminium premiums as collapse accelerates

South Korea's Public Procurement Service (PPS) paid a premium of $223 per tonne in its latest aluminium tender, almost a third less than a month ago, highlighting an accelerating collapse in global premiums as supply swells.

PPS's purchase of 2,000 tonnes of Australian aluminium for shipment by July 20 marked a sharp drop from its last purchase at a $315 per tonne premium for the origin in March.

The state-run procurement agency also said on its website on Wednesday (www.g2b.go.kr) that it had bought another 2,000 tonnes of Indian aluminium for the same shipment at a $209 per tonne premium via tender, also down from its last purchase at a $308 per tonne premium. Both tenders closed on Tuesday.

The two tenders come amid a flood of supply in Asia, which is likely to speed a downturn in global premiums, a delivery surcharge paid on top of London Metal Exchange prices to obtain metal.

Asia has seen a particularly steep drop from record highs, due to its proximity to China, which has stepped up exports of semi-manufactured products, although exports dipped last month.

A searing record run for premiums over the past two years has helped many producers stay afloat during years of low aluminium prices. The steep drop will ramp pressure on producers to cut capacity.

Aluminium maker Alcoa Inc said last month it would shut its only remaining smelter in Brazil, as part of a wider move to curtail expensive capacity.

Surplus stock has also been seen in Japan where aluminium stocks held at three major ports climbed for a 12th month to hit a record peak at the end of March due to a high level of imports and slow housing sector demand.

Faced with high stocks and a supply surplus, aluminium prices have lost about 17 percent since their high in August 2014.