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UPDATE 1-Two Japan aluminium buyers agree $115 Q2 premium-sources
March 1, 2012 / 8:37 AM / 6 years ago

UPDATE 1-Two Japan aluminium buyers agree $115 Q2 premium-sources

* Q1 premiums were around $112-114

* Buyers say Japan demand remains sluggish

* Alcan earlier asked for premiums of $132 (Adds details)

TOKYO, March 1 (Reuters) - Two aluminium buyers in Japan have agreed second-quarter premiums to be paid to producers of $115 per tonne, slightly higher than for the current quarter, while most other Japanese firms are still negotiating for lower premiums, two sources directly involved in the matter said.

The agreed figure is sharply below Rio Tinto Alcan’s initial request for $132, and suggests there is not yet a recovery in Japanese demand that Australian and U.S. aluminium producers have been hoping for to drive a rise in the premium.

Aluminium spot market premiums were rising both in Europe and the United States at the start of the year, underpinned by a healthy demand outlook and smelter shutdowns.

Three-month futures price on the London Metal Exchange have risen more than 15 percent this year.

The two Japanese companies agreed to pay the premiums for low-grade products for shipment during the three months to June, agreeing the premium of $115 requested by a U.S. producer, sources said.

“Talks have just started and it will take a while for the whole negotiation process to be completed,” said a source directly involved in the talks.

No agreement has been reached on premiums for higher-end products, the source added.

One buyer said Japanese firms are still seeking offers not too much above the current quarter’s premiums of $112-114, which are paid over the London Metal Exchange cash price. Buyers pay a premium in addition to the LME cash price to cover freight and insurance and to reflect regional supply and demand.

It will be the first increase in premiums in three quarters, as companies step up production to make up for losses after last year’s earthquake. Higher demand is expected for reconstruction in disaster-hit areas of northeast Japan later this year.

“We expect a pickup in demand for tin later this year but a robust recovery has not yet started,” another source said.

Early this month Rio Tinto Alcan asked Japanese buyers to increase the premium to $132 per tonne, citing growing reconstruction demand, higher prices in China and short supply.

Top U.S. aluminium producer Alcoa said last month it would slash output at two Spanish smelters and shut its Portovesme smelter in Italy, while Norwegian producer Norsk Hydro plans to idle a third of its output at a plant in Australia.

Japan is Asia’s biggest importer of aluminium, with annual consumption of around 2 million tonnes, about 5 percent of global demand. (Reporting by Yuko Inoue; Editing by Michael Watson)

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