UPDATE 2-Codelco ups 2011 China copper premium 35 pct on demand hopes

* Codelco raises 2011 premium to $115/T to China, up 35 pct

* Chinese buyers still in negotiations (Adds buyers' comments) )

By Alonso Soto

SANTIAGO/HONG KONG, Nov 22 (Reuters) - The world's top copper producer, Chile's Codelco , has hiked its 2011 copper premium for buyers in China by 35 percent, signalling expectations that demand from the commodity-hungry Asian giant will remain strong.

Analysts expect a deficit of copper next year, a factor that helped drive the metal to new all-time highs on Nov. 11. The premium for buyers in China will also exceed those for buyers from South Korea and Japan.

Codelco has offered Chinese buyers a premium of $115 a tonne over London Metal Exchange copper prices in 2011, against $85 this year, Santiago-based traders with knowledge of the talks and buyer sources in China said on Monday.

"We are offered $115 a tonne by Codelco," a buyer source said.

Codelco executives were in talks with Chinese buyers in Beijing on Monday and will hold more talks in Shanghai from Tuesday, buyer sources said.

The premium, if settled, would be the highest since 2007, Reuters data shows.

A Codelco official in Santiago was not immediately available for comment.

The hike to Chinese buyers came after Codelco earlier raised premium offers to Japanese and South Korean buyers by 31 percent on the year to $98 a tonne in 2011. [ID:nSGE6AF02Y

"Codelco eyes strong demand in Europe next year. It was saying it wanted to raise European sales by 300,000 tonnes next year," a Codelco client in China said.

"We think the premium is high. We may consider cutting the yearly volumes slightly if Codelco does not offer any special terms," said the source, who would meet Codelco later.

But analysts said Chinese buyers were not in the best position to bargain for a lower premium, since China has a copper deficit and investors are keen to import the metal next year.

"The Chinese buyers don't have much bargaining power," said Fang Junfeng, an analyst at Shanghai CIFCO Futures.

"Everyone is bullish on next year's market. Copper imports are likely to increase after January, after the current lull we are experiencing due to pressure on energy conservation. The time is not on Chinese buyers' side either."

Traders said merchants and investors in China would accept Codelco's premium as they wanted to secure its supply.

But end-users importing copper to make products for export might turn to other origins since high premiums would eat into their profits from processing charges, they said.

Chinese buyers have agreed to pay yearly premiums of $100 or below for refined copper from Japan next year, buyers sources said. (Additional reporting by Polly Yam in HONG KONG and Rujun Shen in SINGAPORE; Editing by Clarence Fernandez)