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UPDATE 1-Aluminium producer seeks Q3 premium of $110/T from Japan buyers -sources

Published 30/05/2016, 02:56 pm
© Reuters.  UPDATE 1-Aluminium producer seeks Q3 premium of $110/T from Japan buyers -sources
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* Q3 offer comes 4-6 pct above Q2 premiums

* Japan aluminium stocks down more than 30 pct from a yr ago

* Japan buyers not willing to accept $110/T -source (Adds comment, detail)

By Yuka Obayashi

TOKYO, May 30 (Reuters) - A major aluminium producer has offered Japanese buyers a premium of $110 per tonne for July-September primary metal shipments, down 4-6 percent from the previous quarter, three sources directly involved in pricing talks said on Monday.

Japan is Asia's biggest importer of the metal and the premiums for primary metal shipments it agrees to pay each quarter over the London Metal Exchange (LME) cash price CMAL0 set the benchmark for the region.

For the April-June quarter, Japanese buyers agreed to pay producers a premium of $115-$117 per tonne PREM-ALUM-JP , up about 5-6 percent from the prior quarter, due to lower local inventories. latest quarterly pricing negotiations began late last week between Japanese buyers and miners including Rio Tinto Ltd RIO.AX RIO.L , Alcoa Inc (NYSE:AA) AA.N and South32 Ltd S32.AX , and are expected to continue in June.

A source at a smelter said the decline mirrored falling inventories in Japan and weaker overseas premiums.

Aluminium stocks at three major Japanese ports - Yokohama, Nagoya and Osaka - fell 6 percent from a month earlier to 324,800 tonnes at the end of April, according to trading house Marubeni Corp 8002.T . inventory has been dropping since hitting a peak in May last year as buyers reduced imports, with the April figure down more than 30 percent from a year earlier.

"The U.S. and European premiums had weakened earlier this year though they have somewhat recovered since hitting bottoms," the smelter source said.

U.S. aluminium premiums 1AUPc1 on the CME are siting at 7.9 cents per pound, down from around 9 cents in late February, while take up of the contract is at record highs, according to open interest which is standing at around 28,000 lots.

Comex European premiums are standing about $78.30 a tonne, down from $113.80 in late December, but slightly firmer than six-month lows of around $70 a month ago.

One end-user source said Japanese buyers were not willing to accept the offer, blaming recent spot premiums standing at around $90 per tonne.

"We have been unhappy about the recent quarterly premiums as they had not reflected real market condition and had stayed above spot premiums," the source said.

"Some buyers may even want to change the way we negotiate premiums every quarter if producers continue to seek much higher levels than spot market."

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