(Reuters) - Japan's aluminium premiums are likely to stay at a record high level of $425 per tonne throughout this year, supported by higher U.S. spot premiums and tight global supply, outside of China, Japanese trading house Sumitomo Corp said.
Japan is Asia's top aluminium 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.
"I don't think Japan's premiums will fall sharply this year as U.S. premiums are about $100 above Japan's level and global supply excluding China is fairly tight," Shingi Yamagiwa, manager of Sumitomo's light metals trading team, told Reuters in an interview on Thursday.
Japanese premiums have risen for five quarters, hitting a record high of $425 per tonne for January-March deliveries, but that was only slightly higher than the previous quarter as the physical market cooled.
The latest quarterly negotiations on premiums dragged on for longer than usual as Japanese buyers resisted paying more, given record stockpiles of metal in December.
"But the inventories will likely drop toward March as Japanese companies want to cut inventories ahead of the end of their business year and Japanese buyers, including us, have reduced delivery volume for this quarter," Yamagiwa said.
He did not say how much volume it has cut for the quarter.
U.S. premiums, now about $530 per tonne, are expected to gradually decline as some producers had shifted supplies from Asia to North America this quarter, he added.
"China will be a wild card," he said. "If China steps up its export of aluminium products or even aluminium ingots, that will change the whole picture and drive down the premiums."
China's exports of semi-finished products climbed 9.8 percent last year to 2.52 million tonnes, easing supply in Asia.
Sumitomo predicts Japan's premiums will slip to $400 per tonne in 2016 and $370 in 2017.
The trading house, which owns 20 percent stakes in Malaysia's two aluminium smelters, expects the global aluminium market, including China, to be roughly in balance in 2015 and 2016, with demand and supply both growing at a pace of around 6 percent each year.
"We had expected China's output to slow down in 2014-16 following government policy, but it looks like it won't happen until 2016-18, about a two-year delay," Yamagiwa said.
"LME aluminium prices will stay in a range of $1,700-1,900 for the first half and gradually move higher to a range of $1,900-2,100 later this year," he said.
LME aluminium has gained 1 percent so far this year and was trading around $1,866 a tonne on Thursday.