(March 11): Aluminium is being offered to Japanese buyers at the highest premium in 11 years, as war in the Middle East constricts supply of one of the world’s most widely used materials.
Rio Tinto Group on Tuesday offered to supply the lightweight metal at a premium of US$350 ($444.69) a ton for second-quarter shipments, according to people familiar with the negotiations, who asked not to be named as the talks are private.
That would be the highest quarterly premium since 2015, when it exceeded US$400, the people said. Rio Tinto declined to comment.
Given the country’s industrial heft, the Main Japanese Port aluminium premium is a closely watched reference for pricing in Asia. The fee is paid on top of London Metal Exchange (LME) cash prices, the world’s benchmark.
The war with Iran has forced cuts to production in the Middle East, which accounts for about 9% of global output. The Strait of Hormuz is effectively shut, preventing shipments of raw materials into the region and exports of finished products.
Rio Tinto, better known as a mining giant, is also a top aluminium supplier thanks to smelters in Canada and Australia. The company had proposed a premium of US$250, before withdrawing it last week after US and Israeli strikes against Iran intensified and prices surged.
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Aluminium, a metal ubiquitous in manufacturing from aircraft to soda cans, has advanced more than 9% on the LME this month, bringing its gain over the past year to 27%. The widening conflict in the Middle East has led several Japanese auto-parts makers to seek supplies from Russian aluminium giant United Co Rusal International PJSC.
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