Japan Aluminum Stockpiles Reach 3-Year High on Demand

By Aya Takada

Jan. 15 (Bloomberg) -- Aluminum stockpiles in Japan, Asia's largest importer, climbed to the highest in almost three years in December as a deepening recession slashed demand for the metal used in homes and cars.

Inventories in Yokohama, Nagoya and Osaka ports jumped 17 percent to 316,300 metric tons from 271,500 tons on Nov. 30, trading company Marubeni Corp. said today. That's the highest since January 2006, according to Marubeni, the country's largest importer of the light metal.

Stockpiles increased as Toyota Motor Corp. and rival carmakers extended production cuts and reduced raw material purchases. Japan's vehicle sales plunged to a 28-year low in 2008 as a recession reduced wages and crippled consumer demand. Demand from construction, the biggest user in Japan, worsened because of a slump in the property market.

``Metal demand is weakening in almost every industrial sector,'' Koji Iida, a spokesman for the Japan Aluminum Association, said by phone. ``The situation is getting worse as manufacturers are deepening output cuts and spending less on production facilities to cope with declining sales.''

Japanese machinery orders, an indicator of capital spending in the next three to six months, fell by a record 16.2 percent in November from a month earlier, the Cabinet Office said today.

Shipments of aluminum rolled products slumped 16 percent from a year earlier to 166,454 metric tons in November, the biggest drop since December 2001, according to the association. Full-year sales may have fallen for a second year as cumulative shipments dropped 2.8 percent in the first 11 months, Iida said.

Premium Negotiation

Worsening demand will put aluminum smelters such as BHP Billiton Ltd. and Rio Tinto Group in a tougher position when they start negotiating quarterly premiums with Japanese trading companies and rolling mills next month.

Aluminum producers cut the fee they charge Japanese buyers to $55-$58 a ton over the London Metal Exchange cash price for the three months to March 31 from $75-77 for October-December. The reduction was the most since 2001 as the world's second- biggest economy entered its first recession in seven years.

Aluminum for delivery in three months on the London Metal Exchange lost 1.1 percent to $1,478 a ton at 1:42 p.m. in Tokyo. The metal fell 36 percent last year on the LME as the global economic slump cut into demand and inventories more than doubled. Stockpiles of aluminum in warehouses approved by the LME reached 2.45 million tons yesterday, the highest since September 1994.

A breakdown of the Japanese stockpiles data follows:

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Yokohama Nagoya Osaka Total =============================================================== Dec. 31, 2008 145,800 157,500 13,000 316,300 Nov. 30, 2008 125,000 134,500 12,000 271,500 Dec. 31, 2007 108,200 78,400 12,000 198,600 (Figures are in metric tons.) ===============================================================

To contact the reporter for this story: Aya Takada in Tokyo at atakada2@bloomberg.net