At Least One Japan Q2 Aluminium Premium at $122-$124/T

TOKYO, Mar. 5 -- At least one deal for term premiums for primary aluminium shipments to Japan for April-June was done at $122-$124 per tonne, down about 5 percent from the first quarter, a buyer said on Thursday.

The buyer said the deal was for good-Western primary aluminium of South African origin, adding that there seemed to be a few other deals done at similar levels.

The buyer declined to say the volumes for the specific deals, but estimated a total of about 5,000-6,000 tonnes.

Other buyers were still negotiating premiums but said they had received offers edging lower from January-March levels.

Japan's primary aluminium buyers agreed to roughly 7-13 percent hikes in premiums for the first quarter, with the bulk of the premiums for January-March settled from $128 to $130 a tonne, a 14-year high and up from $115-$120 for the fourth quarter. "We are getting offers around the mid-$120s and we'd like to see how much lower they could get," another buyer said, adding that below $125 might be one potential level to settle.

"It is higher than we had expected given supply is easing," said a trader at an international trading house, who had expected Q2 premiums of around $120.

Supplies had reportedly offered to Japan at $132, a producer source said, who expected other producers would be accept around $124.

"Demand in Asia, except China, is good. We are selling spot metal above $130," he said.

Japanese buyers had asked overseas traders to supply good Western aluminium at premiums of $115 for Q2, although Western producers had offered the premiums nearly flat from Q1's term premiums.

In South Korea, another big buyer of aluminium in Asia, premiums for spot good Western primary aluminium traded at about $125 a tonne and for Indian metal at $110, traders said.

Japanese industry sources have said a lack of compelling incentives for both Japanese primary aluminium buyers and producers may help to bring the premium for second quarter supplies down slightly from the first quarter.

Aluminium term talks started last week. The talks are held between the suppliers, which include mining giants such as BHP Billiton (BHP.AX: Quote)(BLT.L: Quote) and Alcoa Inc (AA.N: Quote), and Japanese buyers such as trading houses and aluminium mills.

There is generally no sense of supply tightness, globally or domestically, while Japan's demand outlook remains uncertain with the economy facing deepening deflationary pressures.

At the same time, demand prospects for aluminium, used in products from computers to planes, are improving elsewhere, underpinned by expectations for growth in India and China.