Trading house Sumitomo Corp expects Japanese aluminum premiums to remain at between $125 and $175 a tonne next year, against $148 this quarter, although changes in Russian supply could be a swing factor, a company manager said on Thursday.
Japan is Asia’s biggest aluminum importer and the premiums it agrees to pay over the London Metal Exchange (LME) cash price each quarter for primary metal shipments set the benchmark for the region.
Japan’s premiums for the July-September quarter were $148 a tonne, down from $172 in April-June and $177 in January-March, reflecting weak demand for automobiles and rising local inventory.
“Japanese premiums will likely drop further next quarter amid concerns over a global recession,” Yasushi Miyachi, manager of Sumitomo’s light metals trading team, told reporters.
“The premiums are expected to stay in a range of $125-$175 a tonne next year, with (the) market focusing on the flow of Russian metals,” he added.
Russia was Japan’s second-biggest supplier of primary aluminum in 2021, providing 237,777 tonnes, or 17% of Japan’s total import.
The LME prices of aluminum, the most energy-intensive metal to produce, have eased in recent months due to disquiet about a global downturn hitting demand. It has shed 40% since touching a record high of $4,073.5 a tonne in early March to around $2,400 by Thursday.
Sumitomo forecast the metal will trade between $2,300 and $2,700 a tonne later this year and $2,400 and $3,000 next year, while predicting the global aluminum market will face a 412,000 tonne deficit this year and a 125,000 tonne surplus next year.
“Higher smelting costs to reflect soaring energy prices will support aluminum prices, but a potential slowdown in demand due to tightening monetary policy around the world will cap gains,” Miyachi said.
“Unless something happens on the supply side, such as a major cut in smelters’ production or a sudden disruption in Russian supply, the metal prices will trade in the range.”
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