Aluminium buyers in Asia seek premium cuts in 2012

 

 

Global producers and international trading firms had offered premiums of $98-$110 a tonne, a surcharge to London Metal Exchange aluminium prices , to buyers in Hong Kong and China for good Western, standard grade metal, they said.

 

 

Deals were mainly at about $100-$110 a tonne for the delivery in 2011 and around $120 in 2010.

 

 

"We are certainly looking at two-digit premiums next year. Spot physical metal supply has risen and spot premiums have fallen," said a purchaser at a semi-finished aluminium products producer in Asia.

 

 

The firm also was worried that demand for aluminium products in the euro region and the United States would stay weak next year, cutting Chinese exports of semi-finished aluminium products and needs for primary metal imports, the purchaser said.

 

 

A manager for a fabricating plant in the southern Chinese province of Guangdong said the firm had not accepted an offer of a premium just above $100 for delivery in the first half of next year.

 

 

"Internally, we are bearish on next year's premiums because some LME stocks may come out and physical supply could rise," a trader at an international trading house said.

 

 

Traders said more than 1 million tonnes of global aluminium stocks were expected to be released from financing deals and the bulk could be removed to buyers' warehouses in the coming few months. Some metal was being offered in Asia, they said.

 

 

It is not clear how much of those aluminium stocks are in LME warehouses.

 

 

Aluminium stocks in LME-approved warehouses <0#MALSTX-LOC-GRD> hit a record high above 4.71 million tonnes in May 2011, and stood at 4.56 million tonnes on Thursday. Analysts believe another 4 million to 4.5 million tonnes are held off the exchange.

 

 

Financing deals are said to have tied up about 70 percent of the stocks in LME-monitored warehouse.

 

 

PHYSICAL SUPPLY UP

 

 

In Asia, supply of spot physical primary aluminium had risen but demand had stayed lukewarm, pushing down spot premiums, traders said.

 

 

Aluminium fabricators in China, the world's top consumer and producer of the metal, were not keen to import primary metal due to low domestic prices and purchases from southeast Asian buyers had slowed due to weak export orders, traders said.

 

 

"We got more offers for physical aluminium. Many want to sell but they don't seem to be selling very fast," the purchaser said.

 

 

Spot good Western, standard metal was offered at premiums of about $110, on a cost, insurance and freight basis to ports in Guangdong, compared to $120-$150 in September.

 

 

The cost of taking LME aluminium stocks in Asia to Guangdong ports had fallen and could be as low as about $80 premium, the manager at fabricating plant in Guangdong said.

 

 

Traders said spot premiums to South Korea, one of the major buyers for spot aluminium in Asia, had changed hands at about $105, compared to $110-$130 in the previous few months.

 

 

A low $89 premium sold by Indian state-run National Aluminium last week added pressure on spot premiums in Asia. That premium was down from $97 last month and nearly $102 in September.