Indonesia buys aluminum as China waits on copper

Indonesia buys aluminum as China waits on copper

SINGAPORE (Reuter): Indonesian aluminum purchases have risen sharply recently while Chinese copper buyers are waiting on the sidelines for a dip in current high copper prices on the London Metal Exchange (LME), traders said yesterday.

"Indonesian buying of aluminum is running at a good pace," an aluminum dealer for a Singapore-based commodity house said, adding the purchases had picked-up steam after companies found their stocks were running low.

One major Indonesian company recently bought up to 5,000 tons of aluminum in the last two weeks.

"They never anticipated they would need that much aluminum," a trader said. "They're buying now to rebuild their stocks of the metal."

"In the short-term, their demand for aluminum has firmed. The Indonesians did not enter into many long-term contracts because they thought premiums would come down. Some of them found themselves a bit short as a result," a dealer for a major European metal trading company added.

Premiums of western grade 20-25 kg aluminum ingots have climbed in the past month by U$5-$10 to $90-$95 a ton CIF Jakarta, Singapore dealers said.

Aluminum premiums in Singapore were seen at around $65-$83 a ton, they said.

Aluminum demand in Taiwan remains steady while the trade was divided about the level of activity in Japan.

"It's very quiet now in Japan," an aluminum dealer for a Japanese trading house said. "There's not much spot business going on."

But another European trader said reports that aluminum demand in Japan had died down were deceptive since premiums for the second quarter remain buoyant at around the mid-$80 a ton level over cash LME prices.

"The premiums would not be that firm if demand is not there," the trader said. China was also seen engaged in small-lot aluminum buying, but was not much of a factor in the market.

The Chinese have also shied away from the copper market and are waiting for a correction in LME prices before going in, dealers said.

"The Chinese are not buying," Vinod Kumar, managing director of Singapore metal company Donald Mcarthy, said, adding his firm recently held discussions with potential buyers in China. "Nobody seems interested in these prices."

Kumar said business has slowed down "to a trickle. It's not exciting."

"There's nothing spectacular going on," a dealer for a European metal house said. "We heard a few inquiries and I imagine they're from China. But it's pretty much stagnant." Singapore metal dealers said prices in the LME will be looking to the stocks report due out at 0900 GMT on Friday for leads in the market.

Traders here expect copper inventories to decline between 2,000-5,000 tons while aluminum stocks are seen falling by about 5,000-10,000 tons.

A fall in aluminum stocks may spur three-month metal for a fresh try at the $1,700 level after a kerb close on the LME yesterday of $1,689 a ton.