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Alcan seeks Q1 premium of $240/T from Japan buyers

Tuesday, Nov 27, 2012

  Rio Tinto Alcan has written to Japanese buyers seeking a premium of $240 per tonne for January-March primary aluminium shipments, down nearly 6 percent from record premiums in the current quarter, a source directly involved in the talks said.

  A fall in the fee for buyers in Japan, Asia's biggest importers of the metal, will be the first in a year, as the economy slips into recession, with exports falling for a fifth month in a row and demand deteriorating in the domestic auto and electronics sectors.

  Rio Tinto's offer is still higher than some traders' estimates of $220 to $230.

  "I would say a fall in premium to $220 to $230 is appropriate, given a rapid deterioration of domestic demand in the second half," said a trader who did not want to be identified because of the sensitivity of the subject.

  Domestic demand from carmakers and electronics parts makers was particularly weak, while exports to China remained low due to sluggish demand there, he said.

  China's state stockpiler kicked off its latest buying spree on Thursday, taking volumes of 100,000 tonnes each of aluminium and zinc from domestic smelters, sources said, in a move that may have only fleeting impact on sentiment.

  In the current quarter, Japanese buyers paid an average premium of $254 to $255 a tonne over the London Metal Exchange cash price.

  Buyers pay a premium in addition to the LME cash price to cover freight and insurance and to reflect regional supply and demand.

  Premiums more than doubled over the past six months, mainly due to large stocks locked up by banks in financial deals, which make it difficult for manufacturers to access supplies.

  Typically in such financial deals, traders buy physical metal and simultaneously sell forward at a profit, while striking a warehouse deal to store it cheaply in the interim.

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