Japan Q4 aluminium premiums see sharpest drop in 5 yrs

TOKYO, Sept 11 (Reuters) - Japanese primary aluminium premiums fell 14 percent, the first fall in a year and the deepest drop in five years, on deteriorating demand and a bearish outlook stemming from plunging car sales, traders said Thursday. Term premiums for aluminium shipments to Japan for the fourth quarter have largely been agreed at $75-$76 a tonne, over the London Metal Exchange cash price, including insurance and freight costs, from a four-year high of $87-$88 for the current quarter. Traders said very few deals were done at $77, but many buyers had settled at $75 by late Thursday. "We've clinched most of our deals around $75. We've done some deals on $76 and we still have some more deals left," said a trader at a Japanese aluminium product maker. "We actually wanted to settle our deals at a much lower level considering the falling demand and with the demand outlook very poor." Producers had initially lined up their offers around $79-$81, but they gradually lowered the price to reflect the bearish sentiment of the Japanese market. Carmakers such as Toyota Motor Corp have cut production plans on slowing demand in the United States and other major markets, while demand from Japan's construction sector has been hit by tighter building rules and an economic slowdown. Japan is Asia's largest net importer of primary aluminium, with demand estimated at more than 2 million tonnes a year, and traders closely follow Japanese quarterly premiums as they set a benchmark for the region. Negotiations between Japanese buyers, which included trading houses and aluminium mills, originally kicked off in the final week of August. And this week, most buyers and sellers, including mining giants such as BHP Billiton and Alcoa Inc, met at an annual industry gathering in Montreal. Japanese term premiums have climbed about 35 percent since the start of the year until the current quarter, mainly due to supply concerns and robust demand especially in Asia, outside of Japan. But such bullish expectations by sellers have faded since the previous price talks concluded in June. "Producers shouldn't have raised the price last time as demand had been already falling in Japan, but they didn't listen and raised the price," another trader said. "If this sentiment persists, then premiums could fall further," the trader said. The premium talks for the first quarter are expected to start in late November.