July 6, 2020 / 9:04 AM / a month ago

UPDATE 1-Some Japanese aluminium buyers agree Q3 premium at $79/T, down 3.7% from Q2-sources

* Marks 4th straight quarterly drop

* Lowest since Oct-Dec quarter in 2016

* Other buyers still in talks with producers (Adds details and quotes)

By Yuka Obayashi

TOKYO, July 6 (Reuters) - Some Japanese aluminium buyers have agreed to pay a global producer a $79 per tonne premium for July to September shipments, down 3.7% from the previous quarter, reflecting lower demand because of the COVID-19 pandemic, three sources directly involved in the pricing talks said.

Japan is Asia’s biggest aluminium importer and the premiums PREM-ALUM-JP for primary metal shipments it agrees to pay each quarter over the benchmark London Metal Exchange (LME) cash price set the pricing tone for the region.

The July to September figure compares with $82 per tonne paid in April-June and marks a fourth straight quarterly drop. It is also the lowest since the October-December quarter in 2016 and down from initial offers of $85 producers made.

Other Japanese buyers are still negotiating with global suppliers, with further deals expected later this month.

The latest quarterly pricing talks began in late May between Japanese buyers and global producers, including Rio Tinto , and South32 Ltd.

The two sides usually reach agreement before the beginning of the new quarter, but the negotiations have taken longer because of a wide gap between producers’ offers and buyers’ bids, the sources said, asking not to be named.

The coronavirus crisis has hit demand for aluminium in Japan, especially for use in automobiles, prompting buyers to seek lower premiums, a source at an aluminium producer said.

“But producers were sticking to higher premiums on the back of firmer demand from China and South Korea, where industry activity has picked up earlier than Japan and a recovery in the U.S. premiums,” a source at a producer said.

“Still, we’ve made a compromise as time was running out,” he said. (Reporting by Yuka Obayashi, editing by Louise Heavens and Barbara Lewis)

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