One Japan Q4 aluminium deal sealed, talks continue

TOKYO, Sept 5 (Reuters) - At least one Japanese term buyer of primary aluminium sealed a deal for the fourth quarter at a premium of $77 a tonne, down 11 percent from the current quarter, but most buyers stayed on the sidelines, traders said on Friday. Other Japanese term buyers, which include trading houses and aluminium mills, had not clinched a deal by late Friday afternoon as many were aiming to settle at an annual industry gathering in Montreal from Sept. 8. Aluminium premiums were in a downtrend amid slower car sales, weak construction demand in Japan and uncertainty over the health of the global economy, traders said. Sellers, such as mining giants BHP Billiton, have lowered their offers to around $77-78 this week from initial offers of around $79-81 when the talks kicked off last week. "We've settled some part (of our requirements) at $77," said a Japanese trader. Japanese end-users are waiting to buy around $70, but some traders have raised their bids to around $75. Japanese term premiums, the benchmark for the rest of Asia, for the July-September quarter stand at a four-year high of $87-88 per tonne over the cash London Metal Exchange price, including insurance and freight costs. "Most people will decide at the conference next week. Price ideas are still wide apart," another trader said. "I wouldn't be surprised if a deal has been clinched at $77, but it's possible that other premiums could settle in a wide range." Most buyers will make a decision by Sept. 12 when they have to make a declaration of shipments. Usually, a shipment declaration is made on the 15th but since the day is a national holiday in Japan, they will complete deals by next Friday, traders said. "Our mind is in Montreal. The current level is still very high as the demand outlook is very weak. We are already seeing a fall in demand," said a manager at a Japanese aluminium products maker. Suppliers were reluctant about lowering their prices as recent Japanese aluminium shipment data showed strong demand, traders said. Supply concerns still persisted, with the market still concerned about electricity shortages in South Africa. Japan is Asia's largest net importer of primary aluminium, with demand estimated at more than 2 million tonnes a year. Traders in the Asian region closely follow Japanese quarterly premiums as they set a benchmark for the rest of Asia.