Tight supply lifts aluminium premiums,PPS to buy 10kT

* Tight supply drives up spot aluminium premiums by half * South Korea's PPS to buy over 10,000 T before year-end * Japan term quarterly premiums seen at $100-$110 By Polly Yam HONG KONG, Sept 3 (Reuters) - Tight supply of spot aluminium has driven up premiums for physical metal by half in the past month, while South Korea's buying agency may take more than 10,000 tonnes before the end of the year despite strong premiums. Japanese buyers have requested extra term shipments for the fourth quarter from Western producers, who have virtually no extra metal to offer for the period after increasing sales to traders, trading sources said. "PPS will be buying for the commercial (spot) volumes," a source who is familiar to operations of South Korea's state-run Public Procurement Service (PPS) told Reuters. PPS had completed purchases for the term volumes in the first half. The buying agency may buy more than 10,000 tonnes of primary aluminium ingots between now and the end of the year, he said, adding it did not have an up-limit on the premiums for the purchases. Last week, PPS issued a tender to buy 6,000 tonnes of spot metal for delivery in October-November. [ID:nSEO305683] PPS's buying is likely to add fuel to spot premiums in Asia. Spot ingots with Western origins are offered at premiums of $120-$130 per tonne over London Metal Exchange cash aluminium prices for delivery to South Korea and well over $100 to China, compared to $83 sold by India's major producer, National Aluminium Co Ltd , in early August. {ID:nBMA005525] "Domestic demand now is about the same as a year earlier. The government's stimulus packages have turned out to be successful, especially the auto makers who are in a good position to export due to weaker won," the source close to the PPS said. Traders in Asia were seeking spot metal for delivery to South Korea on expected demand recovery from the car sector, underpinning spot premiums in the region, though import demand from China was weak due to high stocks after record imports in the first half, trading sources said. [ID:nHKG49899] "A competitor approached us to sell 3,000 tonnes for South Korea. But all of ours are already for that market," a trader at an international trading house said. Traders who had contracted spot aluminium with producers were also limiting supplies to maintain strong premiums, trading sources said. A big portion of record stocks at LME warehouses are believed to have been locked with financial contracts and are not available for spot offers. [ID:nLL175677] Strong spot premiums are having a spillover effect on term premiums. "Why not offer higher term premiums as that is what we are receiving for spot metal now," a producer source said. Traders and producer sources expect quarterly term premiums between Japanese buyers and Western producers to be settled at $100-$110 a tonne for October-December shipments versus initial offers of $120-$130 and $75 in the current quarter. [ID:nT162966] A trader at a supplier said it was not accepting extra bookings from term clients following rising demand from the U.S. and European markets. "We basically have nothing available for the Chinese." (Editing by Ben Tan)