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Japan Aluminium-Korean Q2 talks end, trade slows

TOKYO: Spot aluminium trading for Japan remained slow in the past week, while several Japanese trading houses recently finished term premium talks with Korean buyers for April-June shipments, traders said on Wednesday.

Term premiums for Korea for the second quarter ranged from $74-$78 per tonne over the London Metal Exchange cash price, traders said, adding that there was talk that Korean traders had sold Russian origin to local buyers at term premiums of $70-$73 a tonne for the second quarter.

In the past, the premiums for Korea were $5 a tonne or more than for Japan, partly reflecting Japan's big import volume and little credit risk among Japanese buyers, but the gap narrowed because of large stockpiles in South Korea and its economic recovery, traders said.

"The premiums for Korea became closer to those for Japan due to large stockpiles in Korea after local buyers actively secured the metal late last year to prepare for Y2K-related computer problems," a trader with a major Tokyo trading house said.

For second quarter, Japanese buyers and foreign suppliers settled the term premium talks at around $72-$74, C&F Japan.

Some Tokyo traders said Korean traders who were trying to reduce their current large stockpiles may start selling their stocks to neighbouring countries.

JAPAN END-USERS REMAIN SIDELINED

Japanese end-users were quiet in the past week as they have covered their requirements for only prompt delivery.

"End-users stayed on the sidelines after mostly covering their requirements up to April delivery," said a trader. "With prices on the LME drifting aimlessly and ahead of the book-closings at the end of March, they will remain on sidelines for a while."

Traders quoted spot aluminium premiums at $71-$74 per tonne over the LME on a C&F basis, little changed from a week ago.

JAPAN INDUSTRY BODY TO UNVEIL 2000/01 DEMAND/SUPPLY OUTLOOK

The Japan Aluminium Association is scheduled to announce its demand and supply outlook of fabricated aluminium products for the 2000/01 fiscal year starting April 1 next Wednesday.

Some traders said the outlook may be discouraging.

"According to recent data, output and shipments of both flat-rolled products and extrusions were both better than a year earlier, but domestic producers have not felt that business was getting better because prices of the products were not rising," said an official at an aluminium product company.

"We expect demand for 2000/01 to be little changed to marginally up from a year earlier as exports are likely to fall while domestic demand will grow only slightly," he added.

In March last year, the association estimated Japan's demand for fabricated aluminium products produced by primary and secondary aluminium and alloy to fall 0.3 percent from a year earlier to 3.71 million tonnes in 1999/00.

The association has not revised the estimates since then.

Last week, the Japan Aluminium Alloy Refiners Association said it sees demand for secondary aluminium and aluminium alloy rising 0.4 percent to 1.458 million tonnes in 2000/01.

Traders said while a recent survey by the Development Bank of Japan showed that Japanese firms plan to increase capital spending in 2000/01 by 0.2 percent from a year earlier, it would unlikely help boost domestic demand for aluminium.

"The survey will support expectations of Japan's economic recovery, but it will not brighten the atmosphere surrounding the aluminium industry," a trader said.-Reuters