Aluminum buyers in Japan, Asia’s biggest importer, will probably win their first reduction in three quarters for fees they pay to producers after premiums in the U.S. and Europe slumped, three executives said.
Premiums for the three months starting in October are likely to fall to the lowest level of the year from this quarter’s $249 to $251 a metric ton over the London Metal Exchange cash price, said the executives, representing buyers and sellers. They asked not to be identified because the talks, which begin this week, are private.
The rates to obtain aluminum tumbled the most in 20 months in Europe last month and retreated from a record in the U.S. as lawmakers and regulators scrutinized long waiting times to withdraw metal from warehouses. The U.S. premium slid to 11 cents a pound from 13 cents in June, according to Laredo, Texas-based researcher Harbor Intelligence.
“The slump in overseas premiums will probably drag down Japanese fees next quarter as new regulation is taking a toll on metals transactions,” said Naohiro Niimura, a partner at research company Market Risk Advisory in Tokyo. Prime Minister Shinzo Abe’s push to end deflation in Japan may give producers some support in trying to resist cuts, Niimura said.
Lower premiums would curb costs for fabricators including Furukawa-Sky Aluminum Corp., Japan’s largest mill. Company spokesman Ryu Sawachi said he couldn’t comment on fees.
Premiums in Japan more than doubled in 2012 and reached an all-time high $255 in the fourth quarter. They slid to $240 to $245 in the three months through March 31 this year before moving back toward the level over the last six months.
Aluminum for delivery in three months closed at $1,893 a ton on the London Metal Exchange on Aug. 23. It slid to $1,758 on June 27, the lowest level since July 2009, and has lost 8.7 percent this year. The LME is closed for a holiday today.
Aluminum for delivery in December on the Shanghai Futures Exchange added 0.2 percent to 14,480 yuan ($2,366) a ton at the 11:30 a.m. local time break.
While Japan’s GDP expanded an annualized 2.6 percent in the second quarter from 3.8 percent in the first amid monetary stimulus advocated by Abe, shipments of rolled-aluminum products by Japanese fabricators fell in the six months through June.
The volume sent to domestic and overseas markets fell 6 percent to 955,997 tons, as demand from the auto industry weakened and exports to Asia dropped, according to the Japan Aluminium Association.
The auto industry is the biggest user of rolled-aluminum products in Japan after the construction and can-manufacturing sectors. Demand fell as car sales in Japan shrank 13 percent in the first half because of an end to subsidy payments by the government to buyers of fuel-efficient models.
“Demand is not strong enough to bolster aluminum premiums in Japan,” said Niimura at Market Risk Advisory.
U.S. premiums may fall further this year after the LME proposed rule changes to reduce queues and American regulators stepped up scrutiny of metals-storage practices, he said.
The LME, which oversees more than 700 warehouses worldwide, proposed rules July 1 to cut waiting times.