P1020A Aluminum Premium CIF Japan in Q1 2026: The Beginning of a Recovery Cycle or Just a Technical Rebound?

After plunging to a multi-year low in Q4 2025, the P1020A aluminum ingot premium delivered CIF Japan (Japan MJP – main ports) is entering a notable recovery phase in Q1 2026. However, the scale and sustainability of this rebound remain open questions, as the global aluminum market is simultaneously shaped by restructuring trade flows, Europe’s carbon policies, and Japan’s unique fiscal-year constraints.

Based on consolidated assessments from SMM, Fastmarkets, and major Asian traders, the center of Japan’s MJP premium in Q1 2026 is expected to rise meaningfully from the Q4 2025 low of USD 86/mt. That said, the recovery is unlikely to be linear. Instead, it will depend heavily on global supply dynamics and inventory behavior in the early months of the year.

From “Weak Asia, Strong Europe and the US” to a Shifting Supply Balance

The global aluminum market at the end of 2025 can be summed up by a phrase frequently used by LME traders: “weak Asia, strong Europe and the US.” This extreme regional divergence forms the foundation of current movements in Japan’s MJP premium.

While the US Midwest aluminum premium (post-tariff) surged beyond USD 1,900/mt and Europe’s Rotterdam P1020A premium climbed to around USD 260/mt—more than 60% higher than early September 2025, Japan’s Q4 premium settled at just USD 86/mt. In China, the closure of processing and export arbitrage windows led to sharply lower spot premiums, further widening inter-regional price gaps.

These disparities reopened global arbitrage windows, accelerating aluminum ingot flows from Asia to Europe and the US. According to LME and SMM data, aluminum inventories in China’s bonded zones had fallen by roughly 50% from their yearly peak by December 2025, while LME stocks in Asia remained at historically low levels. This erosion of readily exportable supply laid the groundwork for a rebound in Asian premiums.

As one Singapore-based non-ferrous metals trader noted, “Asia does not lack production capacity, but it lacks ‘free’ metal. When arbitrage strongly favors Europe and the US, material naturally flows toward profitability.”

Japan: An Import-Dependent Market Highly Sensitive to Global Shifts

With import dependency exceeding 90%, Japan is among the most sensitive markets to changes in global aluminum flows. When Asian supply is siphoned off toward Europe and the US, pressure on Japan’s MJP premium becomes almost inevitable.

Fastmarkets analysts point out that unlike 2023–2024—when Japan benefited from relatively stable supplies from the Middle East and Russia—the 2025–2026 landscape shows suppliers increasingly prioritizing markets capable of absorbing higher premiums. This has left Japan in a weaker negotiating position, especially as the market transitions from surplus to relative tightness.

By late Q4 2025, Japanese traders were already reporting longer delivery lead times and fewer spot offers. These early signals suggest that the ultra-low premium environment of late 2025 was unsustainable.

Smelting Disruptions Amplify Tight-Supply Expectations

Beyond trade-flow restructuring, the aluminum market has been affected by unexpected disruptions in overseas smelting capacity. The unplanned shutdown of a smelter in Iceland and potential closure risks at facilities operated by South32 have raised concerns over effective global supply, particularly in Europe.

According to CRU Group analysts, while these disruptions may not immediately create physical shortages, they have a powerful impact on market expectations. “With LME inventories already at historically low levels in several regions, any supply shock can trigger a rapid premium response,” one analyst said.

For Japan without a domestic production buffer—negative global supply news further intensifies defensive buying sentiment, indirectly supporting higher MJP premiums in Q1 2026.

Europe’s Carbon Policy and Its Spillover Effects on Asia

One of the most discussed themes in recent Reuters and S&P Global reports is the impact of the EU’s Carbon Border Adjustment Mechanism (CBAM). As CBAM approaches full implementation, downstream European consumers have begun accelerating stockpiling to mitigate future carbon-related costs.

This behavior has effectively locked in a portion of global aluminum supply within Europe, reducing flexibility for other regions. At the same time, it has created psychological spillover effects in Asia, where importers fear higher premiums if purchases are delayed.

A Fastmarkets analyst commented, “CBAM is not just a European issue. It is reshaping global aluminum flows, and Asia—including Japan—is among the regions most affected indirectly.”

Demand: Not Booming, but Sufficient to Form a Floor

On the demand side, Japan’s outlook is neither particularly strong nor deeply negative compared with mid-2025. The construction sector, a major aluminum consumer, typically sees new project starts in Q1, creating seasonal demand for aluminum products such as doors, frames, and curtain walls.

Meanwhile, Japan’s automotive sector continues to recover gradually. Although output growth remains modest, structural demand for aluminum persists due to lightweighting trends and the expansion of electric vehicles. According to SMM, this represents “rigid demand”—unlikely to surge, but equally unlikely to collapse.

The combination of steady demand and tightening supply has helped establish a floor for premiums entering Q1 2026.

Spot Markets Move First

A key development is that spot markets have already moved ahead of contract settlements. SMM data show that Japan’s MJP spot premium has rebounded to around USD 130/mt, roughly 85% above the late-October 2025 low.

At Port Klang, Malaysia a critical Asian transshipment hub, FCA transaction prices have reached USD 130–135/mt. Once FOB charges and freight are added, the implied delivered cost to major Asian markets significantly exceeds Q4 2025 settlement levels, reinforcing expectations of a higher MJP benchmark in Q1 2026.

Smelters Raise Offers as Negotiating Power Shifts

While spot markets reflect expectations, smelter offers signal a clear shift in negotiating power. In December 2025, two major aluminum producers submitted Q1 2026 offers to Japan at USD 190/mt and USD 203/mt, nearly 50% higher than Q4 offer ranges of USD 98–103/mt.

Traders note that this sharp increase reflects not only higher costs and supply risks, but also supplier confidence that the market has exited its trough. After a Q4 period dominated by buyers, leverage is steadily returning to sellers.

Fiscal-Year Constraints: A Cap on Short-Term Upside

Despite the positive momentum, a significant headwind remains: Japan’s fiscal year ends in late March 2026. Budget constraints may limit stockpiling by some Japanese consumers, potentially capping the short-term upside of premiums in Q1.

Currently, the LME near-month structure is in contango at around USD 26–27/mt, indicating relatively low holding pressure. Against a backdrop of rising premium expectations, many suppliers are withholding material while awaiting final Q1 premium settlements.

Q1 2026 Outlook: A Conditional Recovery

Taking supply-demand fundamentals, trade flows, and policy factors together, most analysts agree that P1020A CIF Japan premiums in Q1 2026 will rebound from Q4 2025 lows. However, the recovery is likely to be conditional, hinging on post-fiscal-year restocking intensity, developments in global smelting capacity, and the pace of CBAM implementation in Europe.

As one LME-based analyst summarized, “MJP is entering a recovery phase, but not a runaway bull market. It is a recalibration toward the reality that aluminum is no longer as oversupplied as it appeared in the second half of 2025.”

In this context, Q1 2026 may represent a pivotal transition period one that determines whether Japan’s aluminum premium recovery is merely a technical rebound or the beginning of a new price regime in the next global aluminum cycle.