* Traders want $350-$360 premiums for Q2 deliveries to China
* Spot premiums at about $320-$330 in Feb vs $240-$260 in
* Domestic prices have fallen to near mid-2009 levels
By Polly Yam
HONG KONG, Feb 27 China's users of primary
aluminium are set to cut imports of spot metal in the April-June
quarter as they don't want to pay the record premiums demanded
by sellers and may instead use more domestically sourced metal
whose prices have fallen.
A drop in imports by users in the world's top consumer and
producer of primary aluminium could add to pressure on global
prices that near levels last seen in mid-2009.
Global trading firms are asking Chinese importers to pay
premiums of $350-$360 per tonne over the cash London Metal
Exchange price of the metal for second-quarter
deliveries, while importers were agreeable to a maximum of $340,
The Chinese reluctance to pay up comes as global producers
of primary aluminium have sought record $370-$375 premiums from
Japanese buyers, the biggest importers in Asia, for term
shipments in the second quarter, traders said. Buyers pay
premiums to secure deliveries of physical metal.
Chinese importers had paid $240-$260 premiums for spot metal
in November-December 2013 and were asked to pay $330 premium for
February deliveries, traders said.
"For the second quarter, we won't book spot," said a manager
at a factory which uses the metal to manufacture semi-finished
products in the southern province Chinese of Guangdong, home to
dozens of such factories.
The factories in Guangdong would book spot imports only
after they received export orders which meant they could pass on
the record premiums to clients, the manager added.
Some factories were likely to use more Chinese aluminium for
exports in the second quarter due to low prices, traders said.
Prices of the front-month aluminium contract on the Shanghai
Futures Exchange stood at 13,230 yuan ($2,200) per tonne
on Thursday, hovering near levels last seen in June 2009. The
price is used to value spot metal in the domestic market.
In China, factories that use primary aluminium to
manufacture semi-finished products for exports typically import
metal if a higher grade is required. They can use Chinese metal
if a higher grade is not specifically needed.
Data showed China's imports of primary aluminium rose 215
percent from year ago to 54,878 tonnes in January.
China's users holding term contracts with global suppliers
would stick with the contracts and take shipments in April to
June despite the record premiums, traders estimated.
Importers in China use Major Japan Port (MJP) premium mostly
for term shipments. It is used as the benchmark in Asia.
"We will take term shipments in the second quarter. We
probably don't need to buy spot metal," said a purchaser for a
large factory. He added that the firm was facing a tough time
convincing clients to accept the record premium. The clients
were mostly kitchenware and home appliances makers.
Supply of spot aluminium in Asia had fallen after the record
premium sought from Japan, as global trading houses were holding
off metal, waiting for higher premiums, traders said.
Trading houses have booked large amounts from global
producers to store the metal in warehouses to earn higher prices
for forward shipments, a trader at a global supplier said.
Prices for three-months delivery on the LME was about $45
per tonne higher than the LME cash price on
($1 = 6.1248 Chinese yuan)
(Editing by Muralikumar Anantharaman)