Asia spot aluminium up as Russian material scarce

HONG KONG/TOKYO, June 9 (Reuters) - Buyers from Japan, South Korea and China want to secure supply of primary aluminium for delivery in the next 3 months in anticipation of growing tightness in the region, trading sources said on Tuesday. Buyers in Japan and South Korea have been told they will not receive term aluminium from Russia's United Company RUSAL [ORALM.UL] for the third quarter this year, forcing them to look elsewhere, trading and buying sources in the two countries said. "The Russians' sudden supply cut is making a panic in the market. The Japanese and Korean are taking as much as they can find," a source with a large supplier said. Demand for Russian metal from Japan and South Korea had been poor in the first quarter of this year and many buyers in the two countries did not sign annual contracts with RUSAL, which spurred the Russian producer to sell aluminium to other customers, a market source said. RUSAL said it did not comment on market talk. "Currently RUSAL does not have free metal for the third quarter delivery (to Japan and South Korea or elsewhere)," the source said. Chinese fabricators that imported spot Russian aluminium were trying to add term and spot shipments for good Western metal, even though premiums were rising, traders said. Spot aluminium for delivery within two weeks was offered at premiums of $130 a tonne over cash London Metal Exchange prices MAL0 to Hong Kong, $145 to China and $135 to South Korea, compared to about $70-$80 a month earlier, traders said. Premiums were about $100 for delivery in July and onwards. The expected tightness also spurred producers of quality Western aluminium to demand strong term premiums for that quarter above $80 a tonne to Japan, compared to $57-$58 in the current quarter. Japan term premiums are seen as the Asian benchmark. United Company RUSAL, the world's top primary aluminium producer and a major supplier to Asia, plans to cut 2009 output by 500,000 tonnes. Russia typically exports about 400,000 tonnes of aluminium, about 20 percent of Japan's yearly inflows. "RUSAL is not offering any metal, and this does not apply just to Japan but to Asia including South Korea," an official at a large Japanese trading house said. "I see this as a worrying development, with implications far beyond a discussion of what the premium for the third quarter will be," he added. LME STOCKS A market source said the lack of Russian material might continue to the fourth quarter this year and next year given it had already contracted some production and was in talk to contract the rest to other customers. "The fact that Rusal contracted all its metal is not a tragedy or dead-end. There is plenty of aluminium available at LME and off-warrant stocks so consumers could buy required amounts from there," the source said. "This could be a positive development that could lead to reduction of (LME) stocks." But more than 70,000 tonnes of metal was being lined up for LME warehouses in South Korea, adding to LME's record stocks, a trader at a Western trading firm from Seoul said. Those aluminium and the bulk of 162,325 tonnes of ingots in the LME warehouses in South Korea as of Monday were tied up with storage contracts or with financing contracts, and would not be available in coming months, he added. But buyers in Japan and South Korea were looking to increase shipments for the third quarter after reducing stocks in the first half, traders said. "Japanese and South Korean buyers are looking to rebuild stocks," the trader at supplier said. He added traders in those countries had re-exported some aluminium stocks to China due to high spot premiums in March-April.