Japan aluminium buyers to pay record high premiums driven by supply cut

Japan aluminium buyers agreed to pay premiums of $420 a metric ton in the next quarter as confirmed by the buyers and seller representatives in Japan. That is a record rise from the range of $400 to $408 a ton in the present quarter and a record high for the fourth consecutive time.

Japanese buyers and suppliers negotiate the premiums quarterly and they agree to pay this premium on the LME cash price for the three months beginning from October according to a trader source on condition of anonymity.

Japan aluminium premiums surged 71 percent this year with a record hike in every quarter. Alcoa has already announced the closing of Portovesme Smelter in Italy which will reduce its annual smelting capacity by 150,000 tons to 3.6 million tons. The aluminum industry has been on a capacity cut drive since 2009 with a closure of more than 50 smelters outside China. According to a report by Goldman Sachs global demand is expected to exceed output by 579,000 tons this year and 619,000 tons in 2015.

The increasingly used white metal entered a bullish market on the LME in July and reached an 18-month high of $2,119.50 a ton on Aug. 29. Futures for delivery in three months were little changed at $2,106 a ton at 11:20 a.m. Tokyo time.

Premiums cover a purchase of specific quality of metal in a particular location, reflecting local supply and demand. Aluminum imports by Japan increased19 percent to 1.02 million tons during H1 2014 from last year.