Platts assessed the South Korean primary aluminum premium spot market at $90-95/mt plus LME cash, CIF Busan, on Wednesday, for duty unpaid P1020 ingots with a maximum iron content of 0.14%.
The assessment was stable on the week, but has ticked up $7.50/mt in the last month, propelled by restocking among traders and investment banks.
As in recent weeks, warehouse stocks were extremely high in South Korea, estimated at at least 700,000 mt, while consumer demand continued to be thin.
In the last couple of weeks, producer and trader sources have attributed the recent creep in South Korean premiums to special end-of-the-year market dynamics relating to accounting considerations undertaken by banks and certain traders.
These buyers are primarily restocking to bring down the average cost of their warehouse inventories, and are likely to offload the metal in the new year, sources said.
A large portion of warehouse stocks in South Korea were acquired earlier in the year when premiums were substantially higher, closer to circa $200-$300/mt.
Topping up now at lower LME aluminum prices and lower premiums will bring down the average cost of the stocks, and make for a better looking balance sheet, sources said.
A trader who has placed Australian, New Zealand and Indian units in South Korea voiced surprise at the premiums they managed to secure from banks and traders.
They had expected lower, in light of the extraordinarily high stocks in Korean warehouses.
The trader reported the sale of a 200 mt shipment from India in December at $95/mt plus LME cash, CIF Busan.
A 3,000 mt third quarter strip sale comprising 1,000 mt each month was reported done as well at $100/mt CIF Busan, of Australian and New Zealand origins.
However, sources have said the majority of buyers in recent weeks have mostly been keen on November and December cargoes rather than 2016 units.
A producer reported the sale of a 1,500 mt parcel two weeks ago at $90/mt plus LME cash, CIF Busan, to an investment bank.
The gain in premiums have been partly aided by increases in Europe and the US, the source said.
He noted that there were other signs within the Asian region such as Taiwan, of traders seeking to offload stocks that suggested that premiums in Korea may have been closer to $80-$85/mt CIF, were it not for banks and traders topping up on December units.
"There are two markets. The cheap inventory market, and tight CIF market," he said.
South Korea's Public Procurement Service awarded on Wednesday a buy tender for 2,000 mt of "western high-grade" ingots at $115/mt plus LME cash, CIF Incheon.
The winner Hiho Metal will be supplying Australian-origin metal, which is duty free in South Korea.
Glencore submitted the next best offer at $121.30/mt plus LME cash, CIF, for Australian-origin metal, followed by STX Corp. at $108/mt plus LME cash, CIF, for UAE-origin material and Prowell Resources at $135/mt plus LME cash, CIF, for Australian-origin material.
India's Nalco is scheduled to close on December 2 a sell tender for 6,750 mt of ingots for shipment to Singapore in three 2,250 mt monthly lots between December and February.
The tender is to be awarded CIF Singapore basis, although market participants have said before that tender participants rarely ever ship the aluminum to Singapore, often choosing instead to direct supplies to South Korea, followed by other Asian destinations such as Vietnam, China and Thailand.
Nalco levies freight upcharges of $19/mt to direct the shipments to South Korea's Busan port, and $23/mt to Incheon.
Platts South Korean aluminum spot assessment reflects the premium or discount to the LME cash price for P1020A ingots CIF Busan basis, duty-unpaid, for P1020 of any origin, with a typical trade volume of 200 mt to 2,000 mt for loading in the next 30 days.
The specifications are P1020A ingots to meet minimum LME specification, 99.7% Al min, max 0.1% Si, 0.2% Fe, 0.03% zinc, 0.04% gallium, 0.03% vanadium.
The assessment is normalized to reflect metal with a maximum iron content of 0.14%, reflecting dominant trading patterns in Korea.
