Tokyo (Platts)--22Dec2010/506 am EST/1006 GMT
Global security brokers have been visiting South Korean trading companies in the past two weeks, offering to sell 1,000 mt of primary aluminum ingot, South Korean traders said Wednesday. One trader said he was offered up to 4,000 mt of primary aluminum produced by London Metal Exchange-approved smelters, to be delivered from LME warehouses in South Korea and Singapore. A second trader said he was offered over 1,000 mt. The security brokers seem to be focused on South Korea, that have LME-warehouses at Busan and Gwangyang, holding 196,800 mt of aluminum in total. "Sellers target South Korea. It does not make sense to ship the metal to Japan from South Korea, as the cost of freight and cargo handling fees would mount up to at least $20/mt," said a Japanese trader. Moves to trim aluminum inventories started among trading houses in November as the contango spread between the LME contract months narrowed to $5-6/mt. In some instances, the spreads had turned into backwardation, the Japanese trader said. "The LME warehouse-stored metals were tied to financing deals, but with the tighter contango spreads, warehousing operations are not as profitable," the trader added. Meanwhile, the first South Korean trader suggested he would be seeking some sort of a volume discount from sellers, if he were to buy 4,000 mt. A typical spot deal into South Korea is for 500-1,000 mt. Although security brokers are not likely to be selling directly into Japan, the move may put downward pressure on the spot Japanese aluminum premiums, which are at $112-113/mt plus LME cash CIF main Japanese ports, the Japanese trader said. --Mayumi Watanabe, mayumi_watanabe@platts.comSimilar stories appear in Metals Week. See more information at http://bit.ly/MetalsWeek