Japan-focused aluminium premiums up by 13-28% amid tight supply and low global inventories

Global aluminium producers have proposed higher premiums of USD 220-250 per tonne to buyers in Japan for primary aluminium shipments, scheduled between April and June.

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These proposed premiums represent an increase of about 13 to 28 per cent compared with the levels agreed upon in the previous quarter, according to sources directly involved in the ongoing quarterly pricing negotiations.

Japan is among the largest aluminium exporters in Asia, and the quarterly premiums it agrees to pay above the London Metal Exchange cash price play a crucial role in establishing standard prices for the wider Asian market.

Also read: January for Japan: Aluminium stocks slip 1.5% at the ports of Yokohama, Nagoya and Osaka

During the January-March quarter, Japanese buyers accepted a premium of USD 195 per tonne, which marked a sharp increase of 127 per cent from the previous quarter. The significant rise in aluminium premium prices is driven by limited global supply and strong regional demand. 

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Production cuts, along with higher energy and transportation costs, have reduced the amount of aluminium available in the market. At the same time, low inventory levels in London Metal Exchange warehouses have increased concerns about future supply. As Japan, a major aluminium importer, competes for these reduced supplies, producers are demanding higher premiums in quarterly pricing negotiations.