Japan's spot aluminum trade remained thin Monday, but market sources said the outlook for construction demand was positive and would boost buying interest if London Metal Exchange prices fall below $1,800/mt.
The LME three-month aluminum prices were at $1,872-1,873/mt Friday and have stayed above $1,800/mt since April 2, compared to the March average of $1,746/mt.
The unexpected LME price rise has pushed Japanese buyers to the sidelines, and spot trades for both imported and domestic supply have been thin for the past two weeks, sources said.
"But I can see some buyers coming back to buy, waiting for LME to dip below $1,800/mt," said one trader.
Tomomichi Akuta, senior economist at Mitsubishi UFJ Research & Consulting, told Platts he expected LME prices to stay above the January-March levels for some time, until the next exchange announcement on warehouse reforms.
"The recent rise in the LME prices is a reaction to the [English] court ruling on the Rusal's complaint against the LME, possibly on the outlook that the 'low-LME, high-premium' price structure will change," Akuta said.
Japanese traders largely agreed that LME prices would hold above Q1 levels levels.
"Global demand, outside of China, is firm, and LME prices are reflecting that as well," said a second Japanese trader.
Japanese trade and consumer sources said the outlook for construction demand was positive, while they have seen a slight dip in aluminum ingot demand from the automotive and electronic appliance sectors in April due to Japan's sales tax hike to 8% from 5%.
The tax hike has discouraged consumer spending, but construction related demand remained stable, sources said.
"The heavy snow hitting the Kanto region [around Tokyo] in February has created demand for aluminum roofs at parking lots, as roofs fell off," said one extruder. "Hand rails and other aluminum building parts demand has increased too. We still have order logs from snow-related damages."
The extruder source said his company's two plants in the Kanto area were running at or near full rates.
"Our public infrastructure related sales have been up since September 2013, due to increased government spending and preparation works for the 2020 Olympics," said a Tokyo trader focused on extrusion and sheet products.
"The stream of orders has been continuing partly due to shortage of construction workers, so project operators need to reset their completion deadline," the trader added.
But a producer source said previously that he did not expect spot import demand from Japan this quarter as buyers appeared to have sourced their full requirement until the end of June. Three producers were contacted Monday but not available to comment.
"The next quarterly talks will start in a month or so, so I have no plan to place additional spot orders," said the second Japanese trader. "The recent LME price rise underscores good demand, and I don't expect producers to lower their premiums."
A consumer said spot supply seemed "very tight."
Platts assessed Japanese spot import premiums at $365-367/mt plus LME cash, CIF Japan, Monday, unchanged from March 31, due to a lack of reported deals, offers or bids.
