Aluminum buyers in Japan, Asia’s largest importer, agreed to pay a record fee for the metal as demand continued expanding and producers cut output, said three executives involved in negotiations.
The surcharge for the three months starting in July was set at $400 a metric ton over the London Metal Exchange cash price, according to the executives, who represent buyers and sellers and asked not to be identified because they aren’t authorized to speak to the media. That compares with the previous all-time high of $365 to $367 this quarter.
Increasing demand from Japan may help boost benchmark prices in London that have climbed 2.8 percent this year after slumping 13 percent last year. The second-biggest economy in Asia expanded at the fastest pace since 2011 as machinery orders in March jumped the most since 1996. Lower LME prices and rising costs for power and labor spurred producers including Alcoa Inc. (AA:US) to reduce production.
“Japanese buyers have no other options but to pay higher premiums to secure supply as demand improves with the economic recovery,” said Naohiro Niimura, a partner at Market Risk Advisory Co., a researcher in Tokyo.
The fee in Japan has almost doubled in the past two years amid a surge in premiums in North America and Europe as financing transactions and waiting times to get the metal out of LME-tracked warehouses limited supplies.
Aluminum used in beverage cans and cars touched $1,902.50 a ton April 11, the highest since October. The metal for delivery in three months on the LME rose 0.1 percent to $1,851.50 by 12:01 p.m. in Tokyo.
Shipments of rolled-aluminum products by Japanese fabricators to domestic and overseas markets grew 9.4 percent in April, the 10th month of increase, according to the Japan Aluminium Association. Exports jumped 20 percent helped by a weak yen, and demand from Japanese builders and truck makers expanded, the group said.
Japanese companies forecast machinery orders, a leading indicator of private capital expenditure, will rise 0.4 percent in April to June, a fifth quarter of gains.
Record fees boost costs for fabricators including UACJ (5741), the third-largest mill after Alcoa and Novelis Inc. The company had no comment on the fees, said Ryu Sawachi, a UACJ spokesman. Premiums covering a purchase of specific quality of metal in a particular location reflect local supply and demand.
Market Risk Advisory forecasts a global surplus will shrink to 1.21 million tons in 2014 from 1.62 million tons in 2013. United Co. Rusal (486), the top producer, has said its output will fall to the lowest in at least eight years. Earlier this year, Alcoa said it would shut a facility in Australia and curb capacity at two smelters in Brazil.
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