Aluminum Fees in Japan Seen Near Record in First Quarter on Abe

Aluminum premiums in Japan probably will hold near record levels in the first quarter as Prime Minister Shinzo Abe continues economic stimulus and supply is disrupted, according to four executives who are scheduled to start price negotiations next week.

Surcharges for the three months starting in January are likely to be set around this quarter’s $245 to $246 a metric ton over the London Metal Exchange cash price, said the Tokyo-based executives, who represent buyers and sellers and asked not to be identified because they aren’t authorized to speak to the media. Premiums in Asia’s biggest importer of the metal reached a record $255 in the fourth quarter of 2012.

Shipments of rolled-aluminum products by Japanese fabricators expanded for a third month in September as the Bank of Japan’s record stimulus and Abe’s plan to raise sales taxes boosted orders for houses and motor vehicles, increasing demand for the metal. Supply has been crimped by a partial shutdown at a Saudi Arabian smelter and the end of a pact with an Indonesian supplier, the executives said.

“Growth in demand will accelerate this quarter and next as construction work picks up and car sales gather pace before the tax increase in April,” said Koji Iida, the head of statistics at the Japan Aluminium Association.

Premiums in Japan more than doubled last year as fees in the U.S. and Europe rallied. While the surcharge declined this quarter from the three months ended Sept. 30 as the London bourse decided to change rules to speed up withdrawals from warehouses, it has remained above $240 throughout 2013.

LME Prices

Spot aluminum on the LME, which rose 0.2 percent to $1,738.75 a metric ton yesterday, dropped 15 percent this year. The metal for delivery in three months climbed 0.2 percent to $1,786.75 at 1:23 p.m. in Tokyo.

Premiums add to costs for fabricators including Tokyo-based UACJ Corp., the third-largest after Alcoa Inc. and Novelis Inc., with production capacity exceeding 1 million tons a year.

UACJ, which was created by the merger of Furukawa-Sky Aluminum Corp. and Sumitomo Light Metal Industries Ltd., had no comment on the fees, said Ryu Sawachi, a spokesman for the company.

Japan’s economy expanded for a fourth quarter in the three months through September, led by government spending. The Organization for Economic Cooperation and Development raised its outlook for the nation’s growth for 2013 and 2014. Aluminum-product shipments by Japanese fabricators probably will reach the highest level in three years in the 12 months to March 31, according to Iida.

Imports from PT Indonesia Asahan Aluminium ended with the expiration of a joint venture in October with the government set to take control of the stake owned by Japan’s Nippon Asahan Aluminium.

Supply from the Middle East was restricted after production at one of two potlines was halted at a smelter jointly owned by Alcoa and Saudi Arabian Mining Co.

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