Japan aluminium premium talks highlight weak demand

Japan's primary aluminium buyers will continue negotiations next week to set the premium for second-quarter supplies, in talks that have underscored the weakness of demand, industry sources said on Friday. Buyers in Japan are pressing for a premium below $57 per tonne for April-June, down from the current quarter when premiums were largely set around $58-$62 over the London Metal Exchange cash price, including insurance and freight costs. Bids were heard at $55 or lower, while some offers were reported at $57, industry sources said. Other Japanese buyers said they were not planning on making purchases for April as they had no need for new supplies, while an official at one end-user said it may skip buying in the second and third quarters. Aluminium term talks are held between suppliers, which include BHP Billiton (BHP.AX)(BLT.L) and Alcoa Inc (AA.N), and Japanese buyers such as trading houses and aluminium mills. The talks are typically settled by the 15th of each month, which is the deadline for declaring the shipping schedule for the next month's cargo. One Japanese official involved in the talks said his company had already declared its shipping schedule despite not having reached an agreement on the premium for the next quarter. He said premium ideas had narrowed enough to suggest an agreement was in sight. "It's not a welcome development that premiums have not been settled ahead of the shipping schedule ... but, it's not absolutely unheard of," he said. A source at a second Japanese company said its Australian counterpart had not responded to its proposal by the end of the business day on Friday, and he had given up hearing from them that day. Japanese aluminium end-users have been trying to trim inventories due to sharply lower demand from the auto industry, a top consumer of the metal, which is also used in packaging. In the latest indication of Japan's sluggish demand, aluminium stocks at key Japanese ports inched up to remain pegged at a 10-year high in February. [ID:nT79453] Marubeni Corp (8002.T), which tracks the data, said on Friday aluminium stocks at three major Japanese ports rose 3.1 percent from the previous month to 374,600 tonnes. Japan's shipments of aluminium products fell to a 26-year low in January, hit by weak demand. [ID:nT198708] Figures for February will become available later this month. Japan, which must buy virtually all the metal it needs, imports about 2 million tonnes of primary aluminium every year. source:www.reuters.com