Japanese aluminium premiums weaken on heavy stocks in Asia

Premiums for Good Western aluminium ingot imported into Japan have fallen to $81-82/mt plus London Metal Exchange cash, from $87-89/mt, pressured by heavy stocks in Asia, market sources said Wednesday. Japanese buyers said they ware receiving constant spot offers from the West even though fourth quarter premium negotiations were a few weeks away. Offers were heard at $81-82/mt, below the Q3 premiums of $87-89/mt. Q4 premium talks are due to start next month. Spot trading usually fades ahead of such talks as negotiators want to avoid them influencing the outcome. But Western sellers appear not to be waiting for the Q4 premiums settlement this year. "Western traders and producers have heavy stocks. Their sales in Asia [outside Japan] may be below expectations," said a source at a Japanese consumer. Western traders or producers were not available for comment. But a source at a South Korean rolling mill confirmed that his company had reorganized operations earlier this year, suspending output of some products, to compete more effectively with Chinese semi-finished aluminium products imported into South Korea. Korean traders who import Chinese and Good Western aluminium have hefty stocks of up to three months on hand due to rolling mills that make food packaging products cutting output, said a local trade source. The Japanese market, twice the size of the Korean market, appears to hold more opportunities for spot sales, which is why Western traders are keen to offer, said the Japanese consumer source. Japan's aluminium demand rises June-July ahead of summer, when canned drink sales peak. The country's rolled aluminium shipments in June were 202,221 mt, up 1.6% year on year. The increase was due to robust demand for can sheets, shipments of which were at a three-year high of 42,402 mt. But the Japanese are not hungry for spot aluminium. There may be some last-minute buying interest from beverage can makers, but this may cool next month ahead of the Q4 premium talks, sources said. Source:platts