UPDATE:Japan 3Q Aluminum Premiums Likely At $75-$78/Ton-Trader

SINGAPORE (Dow Jones)--Japan aluminum premium negotiations are still unresolved for many contracts, but are likely to settle at $75-$78 per metric ton over the cash London Metal Exchange price, a trader at a major Japanese trading house said Friday. Some reports have suggested the agreements would be in a broad range between $68 and $78/ton, but the $68 figure represents only one contract and is an outlier, he said. "Producers are holding out for $78, but we are hoping they will agree slightly lower than that," the trader said. The deadline for negotiations is Friday as shipping arrangements need to start by June 15, he said. Some contracts have already been agreed at the $75 level, he said. This is a 30% to 35% increase on second quarter settlements as low as $57 to $58/ton, as destocking by major consumers including the auto industry was then in full swing. A trader at another house said restricted supply in the third quarter from Russian aluminum producer Rusal was the major factor behind the difficult negotiations. Japanese premiums for good western brand aluminum, which are set on a quarterly basis, have been traditionally regarded as a benchmark for major industrial consumers in the Asian region. The physical aluminum market in Japan has tightened significantly in recent weeks. "There is little metal available in the spot market and premiums are $130 or more," said the trader. Another trader at a different house said he was not yet convinced that the market was as healthy as the premiums suggest. "I think all we have seen so far is an end to the destocking phase. I hope the market (demand from Japanese industrial consumers) will come back some time in the third quarter but I have not seen any signs yet," he said. Exports of aluminum to China and low aluminum imports into Japan during the second quarter were the major factors behind the tight spot market, rather than a demand rebound, he said. At 0728 GMT on the London Metal Exchange, three-month aluminum was at $1,679.75 a metric ton, down $13.25 since Thursday's kerb.