Japan Q2 aluminium premiums hit 11-year high on Mideast supply fears

By Yuka Obayashi

TOKYO, March 26 (Reuters) - Japanese aluminium buyers agreed to pay premiums of $350 to $353 per metric ton for shipments between April and June, the highest in 11 years, as the Middle East war tightened supply, four sources involved in the pricing talks said.

Japan is a major Asian importer of the metal and the premiums for primary metal shipments it agrees to pay each quarter over the London Metal Exchange (LME) cash price CMAL0 serve as the regional benchmark.

The new level is up 79% to 81% from the $195 paid in the January-March quarter, marking a second straight quarterly increase and the highest since April-June 2015, when premiums touched $380.

In late February, global producers offered Japanese buyers premiums of $220-$250 per ton for the April-June period, up 13%-28% from the current quarter, but later withdrew or let the offer expire while assessing risks to cargoes transiting the Strait of Hormuz after the U.S. and Israel attacked Iran on February 28.

One producer raised its offer to $350 per ton in mid-March and buyers accepted. Another sought higher levels, but both sides eventually settled at $353, the sources said.

"Amid concerns the conflict could drag on, we had little choice but to accept these high prices given the risk of supply disruptions from the region," a source at a Japanese rolling mill said.

"If the strait closure continued, Middle Eastern smelters could struggle to secure raw materials and production may be affected. We compromised quickly because prices could rise further the longer we waited," he said.

The sources declined to be identified due to the sensitivity of the matter.

The Middle East accounts for around 9% of global aluminium supply, and the war has rattled the market by effectively freezing shipments through the strait.

Earlier this month, Aluminium Bahrain ALBH.BH, which runs one of the world's biggest smelters, declared force majeure on shipments, while Qatari smelter Qatalum began shutting down production.

Japan imported nearly 30% of aluminium ingots, including primary and alloy, from the Middle East in 2025.

The quarterly negotiations between Japanese buyers and global miners including Rio Tinto Ltd RIO.AX RIO.L and South32 S32.AX began last month.