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Japan Aluminum buyers facing highest premiums since 1996

Bloomberg reported that aluminum buyers in Japan were asked to accept 57% increase in fees starting in July as supply decreased after smelters cut output and China boosted purchases.

Three executives involved in the negotiations said that a producer offered to sell aluminum at USD 200 per tonne over the London Metal Exchange cash price for the 3 months through September an increase from the USD 127 surcharge this quarter.

Premiums are poised to surge as demand from the auto and construction industries grows amid rebuilding in Japan after last year’s earthquake and tsunami. The nation’s gross domestic product rose an annualized 4.1% last quarter from the final 3 months of 2011 exceeding all but 7 of 27 estimates in a Bloomberg News survey of economists.

Mr Naohiro Niimura partner at research company Market Risk Advisory in Tokyo said that “Higher premiums threaten users’ earnings as they’re having difficulty passing on higher raw-material costs to consumers amid deflation.”

If agreed, the fee would be the highest since Japanese buyers began meeting the bulk of their needs through long term contracts in 1996 surpassing the previous record of USD 125 to USD 130 for the Q1 of 2010. The biggest suppliers to Japan include Rio Tinto Group, BHP Billiton Limited and Alcoa Inc.

Japan’s shipments of rolled aluminum products are forecast to gain 2.8% to 2.06 million tonnes for the year to March 31st 2013 the highest level in 5 years. The increase in aluminum fees would boost costs for fabricators such as Furukawa Sky Aluminum Corporation.

Source - Bloomberg.net

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