Japanese aluminium buyers offered $310-$325/t premiums for October-December shipments

Major aluminium producers have offered Japanese buyers premiums of USD 310-325 per tonne for primary aluminium shipments in the October-December quarter. The bar is 18-22 per cent lower than the USD 395 per tonne premium agreed for the current July-September quarter.

The premium paid by Japanese buyers over the LME cash price is closely watched as a benchmark for aluminium pricing in Asia. The latest offers come after two quarters of rising premiums, driven by tighter physical availability and supply disruptions. Premiums increased from USD 195 per tonne in January-March to USD 350-353 per tonne in April-June and further to USD 395 per tonne for July-September, as geopolitical disruptions affected aluminium supply routes and spot availability, while low LME inventories added to pressure in the physical market.

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The lower offers for the next quarter come as production prospects in the Middle East improve and European premiums soften. Japanese buyers, however, are reportedly seeking a premium below USD 300 per tonne, pointing to weaker spot prices and an easing supply-demand balance in Asia. Higher shipments from Indonesia are also adding to regional supply.

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Despite this, aluminium stocks at Japan's three major ports continue to remain low. Inventories fell to 201,000 tonnes at the end of July, down 8.8 per cent from the previous month and the lowest level since April 2010.

Supply concerns are still supporting the market. Possible shipping disruptions linked to tensions with Iran and strong demand from Japan's semiconductor-related industries remain factors in the ongoing premium discussions.

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Global primary aluminium production also fell 1.7 per cent year-on-year in July, while Gulf production dropped 44 per cent. Two Gulf smelters, accounting for around 9 per cent of global primary aluminium capacity, were affected by the West Asia dispute in March, disrupting their normal production and export routes.

Quarterly premium talks between Japanese buyers and global aluminium producers, namely Rio Tinto and South32, began last week and are expected to continue later this month.