Japan Q1 2009 aluminium talks focus on volume, not premiums

Tokyo (Platts)--3Dec2008 Negotiations on premiums for aluminium cargoes imported into Japan in the first quarter of 2009 were making slow progress, as the focus was more on quantity purchased, market sources involved in the negotiations said Wednesday. Representatives from three Good Western grade aluminium producers met major Japanese customers last week and offered at $65/mt plus London Metal Exchange cash CIF Japan for Q1 2009, down from the current quarter's plus $75-77/mt. Talks on premiums stalled as focus shifted to volume, according to Japanese buyers involved in the negotiations. One Japanese consumer who usually buys roughly 80,000 mt of aluminium every quarter made a decision not to buy for Q1 2009, another consumer also buying less than 50,000 mt decided against doing so. One consumer said he wants to reduce his volume by 20-30% from the current quarter. Based on what sources said, Japan may need to cut Q1 2009 imports by at least 100,000 mt, which is equivalent to five 25,000 mt vessel loads. Premiums seemed to be of secondary importance as buyers were not responsive to producers' initial offers at plus $65/mt. Only one consumer made a bid at plus $50-60/mt, while two trading houses were said to have indicated possibilities at plus $60-65/mt. There was talk that one buyer made a plus $40/mt bid, but it was not confirmed. PRODUCERS MAY NOT SHIP ANY METAL TO JAPAN IN Q1 2009 Some buyers, while suggesting a decrease in their purchase volumes, were worried producers may decide not to ship any aluminium at all to Japan in Q1 2009. "Rather than selling to consumers at low premiums, they might as well bring their ingots to LME warehouses and get paid incentive an of $40/mt," one trader said. "I believe producers are building up stocks at LME approved warehouses in Asia rapidly," another trader said. Sources close to producers, however, disagreed. "Skipping shipments to Japan may have happened in the first quarter of this year, because demand in Asia outside Japan was firm. But demand is slowing everywhere now," one source said. The source added China may reduce export tax on aluminium, to boost the country's exports. Such a measure will decrease demand for Good Western aluminium further. "Some South Korean consumers who were thinking of switching to Good Western aluminium from the Chinese metal, may not make this switch," he said.