One Japan Q1 '09 aluminium deal done, talks continue

TOKYO, Dec 10 (Reuters) - A Japanese firm has won a 16-17 percent cut in the premium for its purchases of primary aluminium for the first quarter of 2009, a term buyer for the company said on Wednesday, as waning demand in a global recession ignites a new price battle. Japan is Asia's largest net importer of primary aluminium, with demand estimated at around 2 million tonnes a year, and the transportation sector, chiefly automobiles, accounts for about 40 percent of the country's aluminium use. But demand for aluminium and other industrial metals has slumped as the global recession forces automakers, including Toyota Motor Corp (7203.T: Quote, Profile, Research, Stock Buzz), the world's biggest automaker, to cut production to cope with falling sales. The source said a few deals had been done for his company to buy aluminium at a premium of $63 a tonne, but added: "It only accounts for a minority portion of the contracts we have." Despite the fall from premiums of $75-$76 per tonne for the October-December term, such a deal was unlikely to please some Japanese buyers, who have pushed for premiums below $60 due to the sharp decline in demand. Traders say some buyers have sought premiums in the range of $40 over the London Metal Exchange cash price, including insurance and freight costs. For a graphic tracking aluminium premiums paid in Japan, click. here Data on Wednesday showed Japanese core machinery orders slid and orders from abroad tumbled in October, in another sign companies are slashing investment in response to the global demand slump, pointing to a deep and long recession in Japan. [ID:nT33767] Japanese industry officials have said aluminium demand has plunged at an unprecedented sharp pace. "I've never seen it this bad, and so it makes sense in a way to cut the premium to match it," one participant in the talks said this week. The progress of the negotiations, which began late in November, has been slow largely due to the demand slump, which has prompted more than a few buyers to say they will cut next year's purchase volumes. The deadline to conclude the talks is looming, however, as shipping schedules for January supplies need to be set by the 15th. Australia, Russia, Brazil and New Zealand are the top exporters of primary aluminium to Japan, with annual shipments amounting to over 2 million tonnes. Suppliers include mining giants such as BHP Billiton and Alcoa Inc while buyers are Japanese trading houses and aluminium mills.