Aluminum Fees for Japan Seen Rebounding on Stimulus Demand

Aluminum buyers in Japan, Asia’s largest importer, will probably agree to pay near-record fees next quarter as demand recovers from a three-year low on economic stimulus, said three executives involved in the talks.

Fees for the three months starting in April may rise about 2 percent from $240 to $245 a metric ton over the London Metal Exchange cash price this quarter, said the executives, representing buyers and suppliers, before negotiations next week. They asked not to be identified because the deals are private.

Fees more than doubled in 2012 and reached a record of $255 in the fourth quarter, boosted by surging premiums in Europe and the U.S. Demand from Japanese fabricators will recover this year from the lowest level since 2009 as economic stimulus by Prime Minister Shinzo Abe will bolster exports, investment and consumption, according to the Japan Aluminium Association.

“A weak yen is expected to boost demand from export-oriented manufacturers,” said Koji Iida, head of statistics at the association. “Demand growth will be also led by the construction sector as consumers may rush to buy houses before the government starts to increase the sales tax next year.”

Japan’s shipments of rolled-aluminum products will probably exceed 2 million tons this year after dipping 0.5 percent to

1.98 million tons in 2012, the smallest volume in three years, Shigenori Yamauchi, the association’s vice chairman, said last month. Japanese mills buy the metal from smelters such as Alcoa Inc. and Rio Tinto Group for fabrication.

Abe’s Target

Abe won an agreement from the Bank of Japan last month to double inflation target to 2 percent, weakening the Japanese currency to an almost three-year low against the dollar. The government has given top priority to ending deflation to revitalize the third-largest economy, and to prepare conditions for doubling the sales tax to 10 percent by October 2015.

The yen traded at 93.35 per dollar at 5:25 p.m. in Tokyo after reaching 94.46 on Feb. 11, the lowest level since May 2010. Aluminum for delivery in three months on the LME fell 1.2 percent to $2,078 a ton.

Toyota Motor Corp., the world’s largest carmaker, raised its profit forecast to a five-year high on Feb. 5 as a weaker yen made Japanese products more profitable overseas. The company also raised its forecast for deliveries by 100,000 vehicles to

8.85 million units for the fiscal year ending in March.

Auto Industry

The auto industry is the biggest user of rolled-aluminum products in Japan after the construction and can-manufacturing sectors. Housing starts in Japan climbed 10 percent in December, the fourth month of increase, backed by government incentives.

Smelters are reluctant to reduce fees to Japan as premiums in the U.S. are rising on demand recovery, the officials said. The so-called Midwest premium will average a record 12.5 cents a pound in 2013, rising from 9.9 cents in 2012, Lloyd O’Carroll, an analyst at Davenport & Co., said last month.

Record premiums added to costs for fabricators such as Furukawa-Sky Aluminum Corp., Japan’s largest mill. Company spokesman Ryu Sawachi said he couldn’t confirm the fee.

The negotiations might be settled by the middle of March, according to the officials. The fee is applied to so-called Good Western-grade aluminum ingot, and includes freight and insurance costs.