SINGAPORE, Sep 20, 2011 (Dow Jones) -- Fourth-quarter Japanese aluminum premiums have settled at $118-119 a metric ton, down from $120-121/ton in the third quarter, market participants involved in negotiations said.

While Japanese domestic demand is set to hold steady in the fourth quarter, the premium slipped slightly from its third-quarter level due to concerns over the economic health of Japan's Western export markets, a major supplier said recently.

A major buyer agreed that concerns over international demand for finished products were the main factor weighing on the fourth-quarter charges, rather than domestic aluminum demand.

"Consumer demand is good in the domestic market," he said, but confirmed that his company had settled its contracts at $118-119/ton, with the bulk of volume set at $118/ton.

Some producers had been holding out for premiums at $120/ton basis cost, insurance and freight, but they agreed to $119/ton shortly before the Sept. 15 shipping deadline, due to continuing volatility in Europe and the U.S.

"Europe is a bit soft," a London-based aluminum trader said, adding that he expects duty-paid aluminum premiums to fall slightly in Europe near term in line with slackening demand.

Despite concerns over a decline in Western aluminum consumption, Asian traders say the London Metal Exchange three-month aluminum price has robust support at $2,300/ton. Three-month aluminum opened at $2,343/ton on the LME Tuesday, down 11% since the start of August.

The major supplier said any move below $2,300/ton would be short lived due to substantial consumer demand in Asia and high production costs narrowing margins.

Asian traders have also pointed to stable Chinese consumption and falling aluminum inventories at terminals in Korea, Malaysia and Singapore providing support for prices. Stocks in the most liquid Asian terminals of Busan, Gwangyang, Singapore and Johor stood at 907,825 tons Monday compared with 966,875 tons Sept. 1.