Sumitomo expects Japan aluminium premiums of $125-$175 a tonne in 2023

TOKYO (Reuters) - Trading house Sumitomo Corp expects Japanese aluminium 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.

FILE PHOTO: Logos of Sumitomo Corp are seen after the company's initiation ceremony at its headquarters in Tokyo, Japan April 2, 2018. REUTERS/Toru Hanai

Japan is Asia’s biggest aluminium 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 aluminium in 2021, providing 237,777 tonnes, or 17% of Japan’s total import.

The LME prices of aluminium, 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 aluminium 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 aluminium 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.”

Reporting by Yuka Obayashi; Editing by Alexander Smith