Japan aluminium premiums at 14-year high

* Quarterly negotiations continue for some contracts * $115 seen as the lowest achievable premium for Q4 By Miho Yoshikawa TOKYO, Sept 4 (Reuters) - Some Japanese buyers have agreed to pay a 14-year high premium for primary aluminium ingots to be supplied in the October-December quarter, despite weak demand at home, as regional supplies of the metal are tight. Industry officials said on Friday that some premiums were agreed at $115 per tonne, up more than 50 percent from the third quarter when the premium was mostly set at $75 over the London Metal Exchange cash price, including insurance and freight costs. Negotiations for fourth-quarter supplies are continuing, but some traders said they had agreed on a premium of $115 for about 50 percent of their supplies for the October-December quarter. Other traders said they expected to soon agree to a premium of $115, as it seemed highly unlikely that a lower price level could be achieved in the current business climate. "We agreed on a premium of $115 because we believe that is the lowest that can be achieved for this quarter," an official directly involved in the talks said. For a graphic of Japan's quarterly aluminium premiums, click: http://graphics.thomsonreuters.com/099/JP_ALIPRM0909.gif Aluminium closed a touch higher at $1,852 per tonne on the LME on Thursday, while latest data showed aluminium stocks remained near a record 4.6 million tonnes. Japan's demand for aluminium slumped dramatically from late last year as auto makers and other major manufacturers were forced to cut production as they struggled to try to weather the worst global economic downturn in decades. The metals industry responded by using up stocks which had ballooned to alarming levels while curbing imports. This resulted in a dramatic decline in domestic stocks, forcing end-users to seek fresh supplies even though demand, which is showing signs of recovery, remains fragile. Aluminium stocks held at key Japanese ports plunged to 174,200 tonnes at the end of July, the lowest since trading house Marubeni Corp started keeping records 14 years ago. [ID:nT19390] For a graphics of Japan's aluminium premiums and port stocks, click: http://graphics.thomsonreuters.com/099/JP_ALPTPM0909.gif Aluminium closed a touch higher at $1,852 per tonne on the LME on Thursday, while latest data showed aluminium stocks remained near a record 4.6 million tonnes. The latest data shows Japanese aluminium product shipments in July rose 5 percent from the previous month, the fifth straight monthly increase, but they remain down nearly 20 percent from a year earlier, underscoring the fragility of the recovery. [ID:nSP499738] In contrast, some of Japan's neighbours appear to be enjoying healthy demand for the metal used in the transport, packaging and power industries. Tight supply of spot aluminium has driven up premiums for physical metal by half in the past month, while South Korea's buying agency may take more than 10,000 tonnes before the end of the year despite strong premiums. [ID:nHKG240389] (Reporting by Miho Yoshikawa; Editing by Ben Tan)