Japanese Buyers Face Rising Aluminium Premiums Amid Supply Shift

Aluminium prices are on the rise as a leading global producer has proposed a premium of $175 per metric ton for primary metal shipments to Japanese buyers for the July-September period. This marks an increase of 18% to 21% from the previous quarter. Japan, a key importer of aluminium in Asia, plays a crucial role in setting benchmarks for the region based on the premiums it agrees to pay over the London Metal Exchange (LME) cash price each quarter.

During the April-June quarter, Japanese buyers agreed to a premium of $145-$148 per ton, showing a significant increase of 61% to 64% from the preceding quarter. This surge was driven by a tight supply situation in Asia, fueled by strong demand from European customers. The higher premiums in Europe have led global producers to redirect their supply to the region, resulting in increased premiums in North America as well.

Despite the uptick in premiums, Japanese buyers are voicing concerns about the elevated levels due to sluggish demand in the country's industrial and construction sectors, coupled with ample inventory levels. Aluminium stocks at major Japanese ports stood at 308,100 metric tons by the end of April, surpassing the ideal range of 250,000 to 300,000 tons.

Quarterly pricing negotiations between Japanese buyers and global suppliers, including companies like Rio Tinto Ltd and South32 Ltd, have commenced and are expected to continue until the following month.

The aluminium market is witnessing a notable shift in premiums for Japanese buyers, reflecting global supply and demand dynamics. While the increase in premiums signifies a robust market, concerns linger over demand sustainability and inventory levels. As negotiations unfold in the coming weeks, stakeholders will closely monitor the evolving landscape of aluminium pricing in the region.