Currencies crisis swallows Asian metal demand

Currencies crisis swallows Asian metal demand

SINGAPORE (Reuter): Southeast Asia's currency crisis has
hammered base metal demand, although there was light buying in
Indonesia following Jakarta's market-friendly reforms aimed at
restoring economic confidence, traders said yesterday.

"It's very bad. Business shrank," a senior dealer for a
Japanese metal trading house told Reuters. "Malaysia, Thailand
and Indonesia wanted to buy, but they could not do so."

Traders said consumption by Indonesia, which used to buy
around 10,000 tons each of zinc and aluminum every month, dived
to around 1,000-2,000 tons a month for both metals.

"A lot of the people in this region are buying cheaper-grade
material like off-grade zinc instead of the special high grade.
It should remain generally weak because of the currency
situation. It's a poor year," one trader said.

Waves of speculative attacks sent Southeast Asian currencies
plumbing fresh lows over the past few weeks and triggered a heavy
sell-off in stock markets in Malaysia, Indonesia, Thailand and
the Philippines.

An aluminum producer said the situation in Indonesia appeared
to have stabilized, especially after Jakarta announced measures
to boost investor confidence in its economy.

"Indonesia is picking up slightly. They are suffering, but
business must go on," he said, adding fourth quarter aluminum
supply contracts for consumers there should be quoted around
US$85-$90 a ton CIF Jakarta.

Thailand appears to be worst hit.

"I don't know how many people are willing to sell to Thailand
because they are not sure how they are going to get paid. Most of
the buying there has been postponed," a dealer said.

"Thailand is simply absent from the market. There is no
demand. They are the ones who have suffered the most," one trader
added.

But one analyst said consumers around the region will
eventually be left with no choice but to absorb the higher cost
of metal imports.

"These countries have quite a lot of infrastructure to do. The
import cost will be quite expensive, but they really need the raw
materials," the analyst said.

Traders said copper, aluminum and zinc were badly needed in
Southeast Asia to build highways, power plants, telecommunication
facilities and houses.

Base metal business will remain flat over the short-term until
the currency woes bedeviling the region eases somewhat.

"We have to wait and see how the whole currency turns out," a
dealer said.

More immediately, negotiations for fourth quarter aluminum
contracts in Japan were concluded recently with premiums set at
lower levels, dealers said.

"It was set at $75-$76 (a ton CIF)," one trader said. "The
talks are over in Japan."

The new premiums are down sharply from a base of $87-$90 in
the third quarter due to weak demand. The Japanese premiums are
normally used as a benchmark for supply contracts in other
countries in Asia.

Fourth quarter premiums in South Korea were pegged at around
$80 a ton CIF Pusan, down from $90-$95 in the third quarter,
while those in Taiwan will probably be set at around $80-$85 a
ton CIF Kaoshiung and Keelung against the previous quarter's $90-
$95.