December 20, 2018 / 8:38 AM / 9 months ago

Marubeni sees Japan aluminum premiums at $100-$130 by late-2019

TOKYO (Reuters) - The premiums that Japanese buyers pay for aluminum are projected to rise toward a range of between $100 and $130 a ton later next year due to tighter global supplies despite an expected return of Rusal supplies, trading house Marubeni said.

London aluminum prices sank to a 16-month low on Thursday after the United States said it would withdraw sanctions on Russian aluminum giant Rusal in one month.

“We didn’t expect the U.S. to lift the sanction on Rusal this early, but aluminum market has largely discounted the lifting for some time,” Hideya Kitamura, general manager at Marubeni’s light metals section, told reporters on Thursday.

“Aluminum prices are likely to recover next year amid a supply shortage, and premiums are expected to climb above $100 a ton in and after April when demand usually picks up,” he said.

Japan is Asia’s top aluminum importer and the premiums for primary metal shipments it agrees to pay each quarter over the London Metal Exchange (LME) cash price set the benchmark for the region.

The premiums that are now being negotiated between the country’s buyers and global producers will likely settle at $85 per ton for January-March quarter and reach $90-$120 in April-June and $100-$130 in the later half of 2019, the Japanese trading house said.

“Since the actual costs to bring the metals to Japan, including shipping fees and insurance, are about $90-$95 a ton, we don’t think the premiums would fall from the current levels,” Kitamura said.

Some Japanese aluminum buyers have agreed to pay global producers a premium of $85 per ton over the LME cash price for shipments in January to March, the lowest in more than two years, four sources involved in pricing talks said this week.

Three-month aluminum on the London Metal Exchange on Thursday dropped as much as 1.1 percent to $1,905.50 a ton, the lowest since Aug. 4, 2017, after the report on Rusal.

However Marubeni, a major Japanese aluminum trader, expects the metal prices to rebound next year, with an average prices between $2,000 and $2,100 in the first half of next year, followed by $2,100-$2,250 in the second-half.

A global aluminum market will see a deficit of 1.38 million tonnes next year, against a shortage of 1.72 million tonnes this year, amid solid demand for the light metals in automobiles.

Reporting by Yuka Obayashi, Editing by Sherry Jacob-Phillips

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