Japan Q4 aluminium premiums fall 35% as Middle Eastern supplies recover

By Yuka Obayashi

TOKYO, Oct 14 (Reuters) - Premiums for aluminium shipments to Japanese buyers for October to December were set at $255 per metric ton, down 35% from the previous quarter, reflecting recovering supplies from the Middle East, five people directly involved in the pricing talks said by Wednesday.

Japan is a major Asian importer of the light metal, and the premiums for primary metal shipments it agrees to pay each quarter over the London Metal Exchange (LME) cash price serve as the regional benchmark.

The agreed premiums are down from $395 per ton in the July-September quarter, the first decline in four quarters and below producers' initial offers of $310-$325.

The sharp drop from the highest level since 2015 in the previous quarter reflects a recovery in Middle Eastern production after Iranian attacks on Gulf smelters in March and increasing supplies from Indonesia, a buyer at a Japanese trading house said.

Emirates Global Aluminium said in August its Al Taweelah smelter was expected to return to previous output levels in early 2027. Aluminium Bahrain ALBH.BH is producing at around 80% of pre-Iran war levels, CEO Ali Al Baqali told Reuters last month.

Japan's imports of aluminium ingots and alloys from the Middle East fell sharply between April and June, but the year-on-year decline has narrowed since July, trade data showed.

"Supply disruptions in the Middle East created extreme market conditions in the previous round, pushing premiums sharply higher," an aluminium supplier said.

"With Middle Eastern supplies recovering and some Indian ingots apparently also arriving in Japan, we settled at $255. That said, demand remains robust across sectors, including semiconductors, and with European premiums still high, there are no signs of a further decline," they added.

The sources declined to be identified because the talks were private.

Aluminium stocks at Japan's three major ports rose 22.7% from the previous month to 246,600 tons at the end of August, according to Marubeni 8002.T, a trading house. Inventories nevertheless remained below the 300,000 tons generally considered adequate.

Quarterly negotiations between Japanese buyers and global producers, including Rio Tinto RIO.AX, RIO.L and South32 S32.AX, began in late August and lasted longer than usual because of a wide gap between the two sides' positions.