By Polly Yam and Chikafumi Hodo
HONG KONG/TOKYO, July 30
(Reuters)
- Premiums of spot primary aluminium have fallen by nearly a quarter this month because of weak demand from major buyers in Asia and increased supply from China, traders said on Wednesday.
Vietnamese buyers have cancelled term shipments of up to 2,000 tonnes of good Western metal per month for the third quarter, adding extra supplies to the spot market, one trader said.
Spot good Western primary aluminium was being offered at premiums of $60-$75 a tonne over cash prices on the London Metal Exchange contract
"Nobody wants to buy, what are you going to do? Cutting $20 is nothing compared to keeping the stocks," a senior trader at an international trading house said from South Korea.
The trader said some 50,000 tonnes of aluminium ingots and T-bars were sitting in bonded warehouses in South Korea, with plans for them to go into the LME warehouses there.
"There is plenty of availability, with large quantities being held as a result of weak demand from users in Southeast Asia," a trader in Japan said.
Traders said increased exports of aluminium alloy ingots from China had been substituted for part of the demand for primary aluminium in Asia since buyers preferred the cheaper Chinese alloy.
"Premiums of primary metal would stay very weak until China's alloy exports fall," the trader in South Korea said. He estimated up to 120,000 tonnes of aluminium alloy and primary aluminium tubes and plates were stored in warehouses in South Korea.
China, the world's top producer and consumer of the metal, which is used in auto, packing and building sectors, exported 431 percent more duty-free aluminium alloy in June, mostly replacing the outflow of primary metal that is subject to a 15 percent tax.
Chinese smelters also increased exports in order to cash in on strong international prices, amid weaker domestic demand.
The LME prices
Chinese aluminium alloy ingots, which are made of primary metal and other metals such as magnesium, silicon and manganese, were offered in South Korea and Japan at discounts of $10-$40 a tonne versus premiums of $40 in the second quarter, traders said.
WEAK DEMAND
Falling premiums for primary metal and aluminium alloy are scaring off buyers in Asia on fears that regional demand is deteriorating.
"The bearish mood is intensifying and premiums appear to be dropping at a faster pace," a trader at a Japanese trading house, said.
A trader at a Japanese fabricating plant said the firm had received more offers with lower premiums, but it had not bought more metal.
"We are pushing hard to sell, but this is a dead market at the moment," a manager at another international trading house said.
In Japan, Asia's top net importer of the metal, traders expect premiums to fall further because auto makers have slashed their production outlook on weaker demand and slower global economic growth.
"High crude prices have pushed up gasoline prices not only in Japan, but worldwide. This is expected to limit usage of cars," Hiroshi Yao, president of Mitsubishi Aluminum and chairman of the Japan Aluminium Association, said.
Fabricating plants in China's Guangdong province, the manufacturing base of aluminium products in the country, have reduced demand for primary metal due to reduced product exports and weaker performance in the domestic building sector.
"July-August traditionally is the low season. But this year, the demand is weaker than previous years," a manager at a fabricating plant in Nanhai city said.
The plants have also received reduced power supplies since June, cutting their production and demand for the metal, and that has forced smelters to export more.
Provided by Reuters
http://news.alibaba.com/134300_Asia/329578/
Asia_Aluminium_Premiums_Fall_Quarter.htm
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