Aluminum Buyers in Japan Said to Win Lower Fees From Suppliers

Aluminum buyers in Japan, Asia’s biggest importer, won the first cut in nine months on fees they pay to producers as London Metal Exchange proposals to ease the backlog at warehouses pushed down global premiums.

The fee for the three months starting in October fell to $245 a metric ton over the price for immediate delivery on the LME from $249 to $251 this quarter, said three executives involved in the negotiations. They asked not to be identified as the talks are private.

The LME has proposed obliging warehouses where waits extend for 100 days or more to let more metal out than they take in. Premiums to obtain metal will drop 60 percent to about $100 as a result of the rules the bourse is expected to approve in October, according to JPMorgan Chase & Co. The global market is heading for an eighth straight year of surplus in 2014, says Sumitomo Corp. (8053) Demand in Japan shows signs of recovery on Prime Minister Shinzo Abe’s economic stimulus.

“Consumers are in a hurry to buy homes and vehicles before the government raises sales tax, supporting metal demand from manufacturers,” said Koji Iida, head of statistics at the Japan Aluminium Association. Abe will weigh business confidence data Oct. 1 before deciding whether to go ahead with a plan to raise the tax to 8 percent in April from 5 percent.

Aluminum for delivery in three months gained 0.3 percent to $1,802 a ton on the London Metal Exchange at 12:37 p.m. Tokyo time. The contract slid to $1,758 on June 27, the lowest level since July 2009, and lost 13 percent this year.

Rates Drop

Rates to obtain aluminum tumbled the most in 20 months in Europe in July and retreated from a record in the U.S. as lawmakers and regulators scrutinized long waiting times to withdraw metal from warehouses.

The decline of about 2 percent in Japan’s quarterly fee is less than the drop in the U.S., where the premium slid to 11 cents a pound last month from 13 cents in June.

Premiums in Japan more than doubled in 2012 and reached a record $255 in the fourth quarter. They slid to $240 to $245 in the three months through March. Lower premiums would curb costs for Furukawa-Sky Aluminum Corp. (5741), the largest mill. Company spokesman Ryu Sawachi declined to comment on fees.

Shipments of rolled-aluminum products by Japanese fabricators to domestic and overseas markets expanded 4.3 percent in July, the first increase in nine months, led by the construction industry, the largest user.

The global surplus will widen to 994,000 tons next year from 883,000 tons in 2013, according to Sumitomo, Japan’s fourth-largest trading company.

To contact the reporter on this story: Aya Takada in Tokyo at atakada2@bloomberg.net

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