Chinese aluminium import premiums edge up as LME prices slip

Platts Chinese import premiums for Good Western aluminum edged up Wednesday to $245-250/mt CIF plus LME cash from $230-250/mt last week, as Chinese buying interest picked up on the back of weaker London Metal Exchange prices this week, industry sources said.

Chinese import queries have increased as LME aluminum prices fell below $1,800/mt, traders and consumers said Wednesday. But actual trades remained lacking as domestic prices also fell in China this week.

"There's some interest, but the overall LME price plus premiums and China's VAT is still higher than domestic currently, so we've not seen any actual trades yet," a Shanghai-based trader said.

"We've also been asking customers this week since the LME fell, but they think the overall import price is still high compared with the domestic price. So they are still waiting, either for LME to drop further or domestic to recover slightly," another Shanghai-based trader said.

The trader said that as long as the LME stayed below $1,800/mt, there would be Chinese buyers willing to pay around $250/mt premiums now.

A Chinese consumer source agreed: "We take into consideration mainly the overall import price, and with the low LME now, we can pay between $245-250/mt premiums. But we're not buying yet, still waiting as we think the gap now is still too wide."

"Those importing with tolling agreements are more likely to buy now and pay high premiums, as they are exempt from VAT and some other taxes, so it's more feasible for them," the consumer said.

On Tuesday, the official LME aluminum cash price was $1,741-1,741.50/mt, compared with $1,801-1,801.50/mt a week ago.

The front-month August aluminium contract on the Shanghai Futures Exchange Wednesday closed at Yuan 14,155/mt ($2,291), down from Yuan 14,250/mt on Tuesday, and also from Yuan 14,370/mt a week ago.

An overall import price for China can generally be calculated using the LME cash price plus premium, multiplied by the Chinese exchange rate and including Chinese VAT of 17% and port charges.

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