China Secondary Al Alloy Makers Gain from LME Backwardation

Chinese secondary alloyed aluminium makers increase the sales of AD12.1 and DIN226 to warehouses registered to London Metal Exchange when LME’s backwardation increases. The warehouses try to secure spot ingot with premium payment to the supplier when the cash price is higher than futures price. With the incentive, Chinese alloy makers try to take chance for higher margin than export to Japan.

Chinese alloy makers offer large log ingot to Singapore’s warehouse in a week, according to trading firm sources. LME aluminium alloy price reached US$ 2,000 per tonne but the cash price is US$ 50-60 higher than futures price.

A source in Ye Chiu Metal in China said recent LME alloy market is attractive for Chinese alloy makers when Japanese demand is still slow. The source said many Chinese alloy makers delivered the alloys aggressively in past several days. Ye Chiu Metal also eyes potential sales to LME warehouses depending on the market.

World largest alloyed aluminium group of Sigma Group is still focusing on sales to the users. A source in the company said the firm watches the market carefully but the firm wouldn’t sell to warehouse unless LME market price would increase by US$ 50 per tonne or more topping the firm’s export offer price.

Chinese alloy offer price increases recently. Sigma Group’s offer is CIF US$ 2,180 per tonne to Japan, which is US$ 20 higher than previous day. Chinese smaller makers also increase the offer to around US$ 2,100 level.