PREVIEW-Japan braces for hike in Q3 aluminium premium

* Japan buyers brace for a 17 pct hike in Q3 premiums vs Q2 * Aluminium stocks fall; some end-users think of buying again * Industry officials remain cautious over outlook By Miho Yoshikawa TOKYO, June 3 (Reuters) - Japanese primary aluminium buyers are prepared for a hike of about 17 percent in term premiums for the third quarter, amid signs that demand for the metal may be emerging as domestic inventories go down. Some sellers are demanding a sharper hike in premiums, however, citing tight aluminium supplies in Asia, where China, Taiwan and South Korea are snapping up cargoes. Term premiums for the second quarter were mostly in a range of $56-$58 a tonne, a three-year low, in the face of Japan's worst downturn in half a century. The downturn forced automakers, large consumers of aluminium, and other manufacturers to cut output. "We can accept a rise of about $10 in the premium, but a level above that is not reasonable," one industry official said. Some industry officials said they had reached an agreement for a small volume of aluminium around $65-$69 a tonne over the London Metal Exchange cash price, including insurance and freight costs, at the start of talks last week. These deals, however, only represented a modest portion of the agreement for the quarter. "The offers we have been getting largely fall in the range of $68-$75," an official with a second firm said. There was also talk of offers above $80. Japan's demand for aluminium has tumbled since late last year, with imports of the metal in January-April falling over 30 percent from the same period in 2008 to about 431,000 tonnes. Many end-users chose not to buy fresh supplies, instead trying to use up stocks bloated by a virtual absence of demand for the metal, which is used in transport and packaging. Japan, Asia's top net importer of the metal, imports 1.9-2.0 million tonnes of primary aluminium annually. For details of Japan's aluminium imports and a breakdown of the top three sources in 2008, click: http://graphics.thomsonreuters.com/069/JP_ALIMPC0609.jpg TO BUY OR NOT TO BUY Japan's aluminium product shipments rose for the second month running in April but industry officials said the outlook remained grim, citing the continued heavy fall in shipments compared with the same month last year. [ID:nT286257] Industry officials say inventories have now been trimmed to a healthier level. An industry official with an end-user, which has not bought any aluminium this year, said it has started to think of buying fresh cargoes of the metal although it has not yet made a final decision to do so for the third quarter. "I think we will return to buying normally from the fourth quarter ... but things are looking a bit tricky in the third quarter," he said. He said his firm did not immediately need any fresh aluminium cargoes but was unsure if it had sufficient supplies to cover the July-September period. Japanese factory output jumped in April at the fastest rate in more than half a century, although much of it was either restocking of depleted inventory or a result of stimulus spending in China and other major economies. [ID:nT20910] Aluminium end-users say aluminium consumption in certain sectors, including for cans, is brisk but they remain cautious, saying it is premature to conclude demand has recovered. Industry officials say they are hearing that aluminium supplies are tight due to consumption in other parts of Asia, in particular South Korea, where the state-run Public Procurement Service has been buying actively. [MET/TEND] The official with the end-user said the domestic supply tightness was slightly puzzling, however, given that stocks of aluminium at key Japanese ports, though off a 10-year high, were still up about 40 percent from a year earlier at the end of April. [ID:nT66488]