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S Korea aluminum: Spot premiums edge up $2.50/mt to $105-$110/mt

Increase font size  Decrease font size Date:2016-02-26   Views:542
Platts assessed South Korean primary aluminum spot premiums at $105-$110/mt plus LME cash, CIF Busan, on Wednesday, for seaborne duty unpaid P1020 ingots with a maximum iron content of 0.14%, loading in the next 30 days.

The assessment gained $2.50/mt from a week ago, but has declined $2.50/mt in the last month.

The big picture suggests a stagnant South Korean market, a producer said.

The modest $2.50/mt gain on the week was not an indication of a stronger market, but largely driven by recent appetite in Japan for spot units, and general anticipation that South Korea's second quarter shipments would likely be higher than $110/mt, and possibly hit $120/mt.

A widening backwardation in LME aluminum may have lessened the chance of a more ambitious increase in the Q2 shipments to $130/mt, but $120/mt may be plausible, a number of trader and producer sources said in the last couple of days.

Other reasons that sources cited for generally anticipating a gain in the Q2 premiums were smelting cuts in China, and a seeming inclination among certain Korean traders to sit on warehouse stocks they had acquired a while back at significantly higher costs.

These stockholders now find they are unable to justify reselling if they can't make a margin, let alone breakeven, sources said.

This has created an artificial tightness in South Korea. While there is no shortage of warehouse stocks in the country, there few cheap offers, sources said.

There were other mixed comments as well, that suggested a soft market environment in Korea, with some saying the wide LME backwardation has provided less incentive for holders to carry over.

The weak won and recent run-up in LME price has also raised the cost of imports, sources said.

Six consumer, producer and trader sources put the South Korean premiums at $105-$110/mt CIF Busan for seaborne shipments in the next 30 days, with two other traders citing $100-$110/mt as a market clearing rate.

A local consumer put the domestic market at $125-$130/mt plus LME cash, FCA Busan. But three western and Asian traders, and a second consumer deemed Korean domestic premiums closer to $115-$120/mt.

A South Korean trader said due to a wider backwardation in the LME, he would be prepared to discount $5-$10/mt from $125/mt FCA Busan, offering $115-$120/mt for lots comprising 200-1,000 mt, of Australian and Indian origins.

Another Korean trader reported a domestic purchase two weeks ago from a trader, comprising 4,000 mt of metal from the Middle East at $105/mt plus LME cash, BWT (bonded warehouse transaction) basis including terminal handling charges.

The premium seemed low and may have been sold by a global trader who had restocked in more recent months, a third trader said.

Platts surveyed market participants earlier on how they would convert FCA and BWT Busan values to CIF, and a number indicated that CIF values would typically be $10-$15/mt below FCA.

South Korea's Public Procurement Service is slated to award on February 26 a buy tender for 700 mt of western grade aluminum ingots for shipment to Incheon by May 16.

The PPS' last buy tender was last December.

The office typically issues one to two buy tenders every six weeks, but there was an unusually longer interval this time due to high warehouse stocks in South Korea.

The purchase volume of 700 mt is also untypically small against the 2,000-3,000 mt lot sizes that PPS normally buys.

India's Nalco awarded on February 19 a sell tender for 5,250 mt of aluminum ingots at $75/mt plus LME cash, CIF Singapore, for shipment in three 1,750 mt monthly lots between March and May.

The tender closed February 18, with validity up to February 22. It was awarded to STX Corp of South Korea.

Market participants have said that although Nalco's tender documents call for the metal to be delivered to Singapore, the shipments rarely end up there. South Korea is often the buyers' chosen destination, with other Asian ports in Vietnam, China and Thailand also taking deliveries.

In the latest tenders, Nalco will levy freight upcharges of $14/mt and $27.50/mt to direct the shipments to South Korea's Busan and Incheon ports, respectively. Nalco's P1020 typically has an average Fe content of more than 0.14%.

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.
 
 
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