PREVIEW-High Q1 aluminium premium could slow Japan buying

* What: Japan first quarter aluminium premiums * When: Late November, early December * Japanese buyers brace for 10 pct rise; new 14-yr peak By Miho Yoshikawa TOKYO, Nov 20 (Reuters) - Japan's aluminium buyers are bracing for a 10 percent rise in premiums for the first quarter of 2010 after hitting a 14-year high in the fourth quarter as tight supply overcomes worries that demand has yet to properly recover. Japanese buyers accepted premiums of $115-$120 per tonne for delivery in October-December, as sellers profited from worries about low stockpiles at Japanese ports and tightly held inventories in London Metal Exchange warehouses. Stocks of the metal held at the key Japanese ports of Yokohama, Nagoya and Osaka fell to 169,900 tonnes at the end of September, the lowest since trading company Marubeni Corp began compiling the data 14 years ago. They have since inched up to 171,200 tonnes at the end of October, but most of the 4.5 million tonnes of aluminium in LME warehouses around the world remains firmly wrapped up in long term financing deals, quarantined from the market. Japanese buyers said they expect sellers to hike the premium to about $130 at the start of upcoming talks. "Their view is that regionally, when you look at other countries in the area, demand is strong," one official with a Japanese end-user said. That strength has shown up in prices, which have risen 7.5 percent so far this quarter, having gained 16 percent in the third. and the lightweight, last quoted on the LME at $2,050 , is trading near one-year highs. An official with another end-user also said he expected the premium to rise above the $115-$120 set in the fourth quarter. "I think the premium was $115 for non-Western aluminium at a recent South Korean tender, and so my guess is good Western should fetch an additional $10 to $15, " he said. Industry officials say Japan's aluminium demand has returned to about 80 percent of levels of a year earlier. Primary aluminium ingots were offered at quarterly premiums of around $130 over cash London Metal Exchange prices for Australia origin and about $120 for non-fixed origins for delivery in the first three months of next year to ports in Hong Kong, China and South Korea. DEMAND "OPAQUE" Japanese industry officials say domestic demand for the metal used in products from computers to planes is likely to be weak in the first few months of 2010, with some economists forecasting Japan will slide back into recession. "The outlook for demand in the first quarter is opaque, and as many say there are fears that there might be a double dip (recession)," said a Japanese official due to take part in talks that will begin later this month. "Immediate demand stemming from moves to build domestic stocks appear to have been completed for the time being." "We are going to try to set our programme so we will not be forced to make purchases we don't want," the official with the second end-user said. The first end-user official said he believed there was slightly less need to buy in January-March next year. "I think the situation we face is a touch less difficult than the situation we faced during talks for the fourth quarter." Worries that UC RUSAL would not sell metal into Asia stoked fears of a shortage during talks for third-quarter supplies and prompted Japanese buyers to accept a roughly 30 percent hike in premiums, have eased a little. Industry officials say they have not heard whether the indebted Russian aluminium giant will take part in upcoming Q1 talks. (Editing by Nick Trevethan)