Aluminum buyers in Japan, Asia’s largest importer, are set to secure the first fee reduction in a year from suppliers as the economy sinks into a recession, according to three executives involved in the negotiations.
Premiums for the three months starting in January may drop about 4 percent from fees this quarter that ranged between $253 and $255 a metric ton over the London Metal Exchange cash price, said the executives, representing suppliers and buyers, who asked not to be identified because the talks are private.
Fees more than doubled in the past 12 months, reaching a record this quarter, supported by rising premiums in Europe and the U.S. Now Japan’s economy is shrinking, contracting an annualized 3.5 percent last quarter, the most since the earthquake and tsunami in early 2011. Gross domestic product may decline a further 0.4 percent in the final three months of this year, the third technical recession since 2008, according to a Bloomberg News survey of economists.
“It’s hard to find factors that may push up metal demand in the second half of this fiscal year,” said Koji Iida, head of statistics at the Japan Aluminium Association, which reported an unexpected drop in shipments in the six months ended Sept. 30. “We are concerned about demand from the auto sector, as the anti-Japan campaign in China is taking a toll.”
Toyota Motor Corp. (7203), Honda Motor Co. (7267) and Nissan Motor Co. (7201) saw a plunge in deliveries to China for a second month in October as consumers shunned their cars amid a territorial spat.
Shipments to China, Japan’s largest export market, fell 11.6 percent last month, data from the Finance Ministry showed yesterday. A territorial dispute over islands in the East China Sea hurt the $340 billion trade relationship between Asia’s two biggest economies.
Japanese automaker output in China may be 40 percent less than normal this quarter and gradually improve until it’s fully recovered in the third quarter of next year, according to an Oct. 23 internal note prepared by Toyota’s research division.
The auto industry is the biggest consumer of rolled- aluminum products in Japan after the construction and can- manufacturing sectors. Shipments to the industry began dropping in August because of an end to subsidy payments by the Japanese government to buyers of fuel-efficient vehicles.
Japan’s shipments of rolled-aluminum products dropped 2.5 percent in September, the second month of decline, according to the association. The metal stockpiled in the ports of Yokohama, Nagoya and Osaka swelled to an eight-month high in September before dropping 5.9 percent last month, according to trading company Marubeni Corp.
Record premiums this quarter have added to costs for fabricators such as Furukawa-Sky Aluminum Corp. (5741), Japan’s largest mill. Company spokesman Ryu Sawachi said he couldn’t confirm the premium for next quarter.
The negotiations might be settled by the middle of December, according to the officials. The fee is applied to so-called Good Western-grade aluminum ingot, and includes freight and insurance costs.
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