Japanese aluminium premium for Q1 CY’26 rises sharply on tight global supply

• Premium up 127% from previous quarter
• Negotiations extended due to wide buyer-seller gap

The premium for aluminium shipments to Japan for January-March 2026 was set at $195/t, up 127% from the previous quarter, marking the first quarterly increase in a year. The rise reflects tight global supply, production disruptions, and higher overseas premiums, according to multiple sources involved in the pricing talks.

Negotiations began in early December between Japanese buyers and producers including Rio Tinto and South32, and extended into the new year due to a wide gap between sellers’ and buyers’ expectations. Producers’ second-round offers had ranged from $210-225/t, while initial offers were $190-203/t. The final settlement of $195/t was a compromise that avoided prolonged negotiations, given buyers’ resistance to prices in the $200/t range.

The premium surge was underpinned by supply concerns, notably South32’s Mozal smelter in Mozambique, which was mothballed in March after failing to secure a power supply agreement. Additional pressures came from power outages and operational disruptions at Icelandic smelters and other global production sites. Despite flat domestic demand in Japan, overseas supply worries pushed spot premiums to around $170/t, prompting producers to prioritise shipments to Japan at higher premiums.

Japan, as a major Asian importer of primary aluminium, sets quarterly premiums over the London Metal Exchange (LME) cash price, which serve as a regional benchmark. This quarter’s sharp increase highlights the ongoing tightening of global supply, the vulnerability of smelters to power and operational constraints, and the balancing act producers face between capturing higher premiums and maintaining customer relationships in Asia.

Meanwhile, LME aluminium prices have risen 21% y-o-y in January 2026 to $3,122/t, while LME warehouse inventories fell 18% to 499,140 t, reflecting declining global stocks and reinforcing the tightness driving premiums in Japan.

Outlook

Aluminium premiums in Japan are likely to remain elevated in Q2CY’26 amid ongoing supply constraints from smelter outages and tight global inventories. While domestic demand remains modest, overseas market pressures and LME price strength could sustain premiums, with negotiations expected to be closely watched by buyers and producers alike.