Aluminum stored in London Metal Exchange warehouses, known as LME warrant metal, is being offered at $7/mt or $100-$105/mt CIF Japan, international traders said Friday.
The warrants are for any Good Western origin aluminum, which is from Australia, the Middle East, South Africa or North America.
Traders said it was not clear which LME warehouse the supplies were coming from, though it was likely to be from Busan in South Korea, from where container shipping costs to Japan were as low as $25/mt.
The shipping cost from Singapore and Malaysia would be roughly $40/mt.
The breakdown of the $100-$105/mt CIF Japan warrant offer is $7/mt for the warrant, $5/mt for rent paid to the LME warehouse before loading, $45/mt FOT, $25/mt freight to Japan and $15/mt terminal handling charges.
One international trader said he would not be able to find buyers in Japan as some Japanese exclude warrant metals from their purchase contracts.
Japanese buyers also ask warrant metals to be discounted by $10/mt or more to metal shipped directly from suppliers, as they incur additional re-bundling and cleaning costs, depending on the storage conditions in the LME warehouses.
Over 2010-14, when the LME aluminum cash-three month spread was typically over $30/mt and interest rates low, it was popular practice to keep metal in LME warehouses rather than selling in the physical market.
Now, with interest rates rising and a persistently slim cash-three month spread of $2-$3/mt, there is less incentive to keep aluminum stocks, said an international trader.
Warrant metal sales have been increasing since the start of the year as high spot premiums in the US encouraged warrant holders to sell their metal there.
In Asia, the availability of warrant supplies caused spot premiums to sink by around $10/mt in April, a Japanese trader told Platts earlier.
"In Southeast Asia, warrant metals are not as actively traded as before, because Q3 Japan premiums were seen to fall [from Q2]. What is the point of getting new supplies when the general market trend is down?" said a second international trader.
The Q3 aluminum premium negotiations started last week in Tokyo.
Four producers have initially offered Q3 premiums in the range of $120-$128/mt CIF Japan, down from $128/mt for Q2.
