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Rio offers Japan aluminum at higher premium in 3d qtr.

Keywords: Tags  Rio Tinto Alcan, aluminum, premium, Japanese premiums, Shivani Singh

SINGAPORE — Rio Tinto Alcan Inc.’s initial offer for third-quarter aluminum premiums in Japan is above second-quarter premiums, three trading sources told AMM sister publication Metal Bulletin.

The Montreal-based producer has offered aluminum at a premium of $254 per tonne over the London Metal Exchange cash price for delivery at main Japanese ports for July through September, said sources who received the offer.

The Japanese economy is showing signs of recovery, which was the primary reason Rio Tinto gave for the higher premium, a source said. A second trader said the company also cited strong premiums in other parts of the world.

The negotiation of quarterly premiums in Japan, seen as the benchmark for Asia, started this week. Other major producers have yet to put forward third-quarter offers.

Japanese buyers had agreed to second-quarter premiums of $248 to $249 per tonne after producers attempted to get $250 to $255 per tonne in the early stages of negotiations.

"With a weaker Japanese yen, exports are really good from Japan," the first trader said, and automotive industry exports are expected to increase. However, premiums of $254 for the third quarter are "too much" and should be negotiated down to $250 per tonne, he said.

Demand for primary metal remains stable, according to other traders, who will be negotiating with aluminum producers over the next few weeks.

"We did not see weak demand. On the other hand, we did not see strong demand either," a third trader said. "In theory, (a) weak yen is (good) for the export industry, but at the same time, importing raw materials (gets expensive). I haven’t seen imports improve yet, but exporters expect demand to be better."

Japan meets all of its primary aluminum needs by importing about 2 million tonnes annually.

"Importing aluminum may be expensive for the Japanese buyer, but since exports are growing, even if they buy aluminum at a higher price they can sell more quantity," the first trader said. "So it still makes sense."

Elsewhere in Asia, premiums remain stable in a quiet market as participants watch the negotiations in Japan. "Overall, aluminum is quite lackluster," a trader in Singapore said.

There are offers of $175 to $185 per tonne for London Metal Exchange warehouses in Singapore and Johor, Malaysia, but demand has not been overwhelming. Metal Bulletin’s South Korea c.i.f. premium for aluminum was at $220 to $230 per tonne last week. 

A version of this article was first published by AMM sister publication Metal Bulletin.

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