Osamu Kamoda, general manager at Kobe's aluminium and copper raw materials department, said he expects aluminium stockpiles at the Port of Yokohama to fall briefly below 150,000 tonnes within the next few months, compared with an estimated 191,000 tonnes at the end of February.

"Japanese demand for aluminium seasonally reaches its peak during the April-July quarter due to demand for aluminium cans and demand for air conditioners," he said. "If the stockpiles at the Port of Yokohama fall below 150,000 tonnes, users will have a hard time securing the metal they need."

He said, however, that he expects supply tightness to ease around the summer or sometime in the third quarter as trading houses are expected to increase aluminium imports to Japan.

As a result, spot premiums for Japan on a cost,insurance and freight (CIF) basis will likely fall to around $50 from current lofty levels between $60 and $80, he said.

"But this scenario depends on demand in the United States and Europe... If demand in US and European markets remains strong, then it's a different story," he added. In early March, term premiums for second-quarter foreign supplies to Japan were set at around $45 per tonne, up from term premiums of $35-$37 for first quarter shipments, he said. Aluminium stocks at the Port of Yokohama, a yardstick for overall stockpile levels in Japan, fell below 200,000 tonnes for the first time in a year-and-a-half at the end of February after rising as high as 310,000 tonnes in June 1998.

The decline in inventories resulted from a cutback in imports by trading houses, reflecting weak domestic demand amid the worst recession in postwar Japan, traders said.A slowdown in Japanese imports has also prompted Australian suppliers to export their metal to US and European markets. In the first two months ofcalendar 1999, Japan's refined aluminium imports totalled 234,621 tonnes, down 42 percent from the same period a year earlier, official statistics showed. In addition, demand in South Korea and China picked up earlier than expected after active destocking, prompting suppliers earlier this year to buy back metal originally sold to Japan in order to divert it to those markets, they said.

Even though Japan is now experiencing tight supply conditions, Kamoda said, aluminium supplies are expected to be in a net surplus on a global basis this year and next, and if spot premiums for Japan reach $80 per tonne suppliers are likely to resume aluminium shipments to Japan.

Asked about the outlook for Japan's domestic aluminium demand, Kamoda said: "Japanese demand may have already passed its worst period last year, but we are not convinced of that."Last month, the Japan Aluminium Federation forecast shipments of rolled aluminium products in Japan would rise 0.7 per cent to 2.04 million tonnes in the business yearthat began on April 1, after falling 10.3 per cent in 1998/99.

In calendar 1998, Japan imported 1.86 million tonnes of refined aluminium, down 14 percent from a year earlier.