UPDATE 1-Producers seek $250/T Q4 aluminium premium in Japan-sources

Wed Aug 28, 2013 8:58am EDT

TOKYO Aug 28 (Reuters) - Top aluminium producers have offered Japanese buyers a premium of $250 per tonne for October-December primary metal shipments, unchanged from the previous quarter, three sources involved in quarterly pricing talks said on Wednesday.

Japan is Asia's biggest aluminium importer and the fee sets the benchmark for the region.

The offer suggests producers are not banking on a big increase in demand towards year-end but may also signal a proposed overhaul of the London Metal Exchange's warehousing system has started to lightly pressure premiums in the region.

According to the sources, a major producer has written to Japanese buyers seeking a premium of $250 per tonne while another top seller has offered the same price in the quarterly pricing negotiations.

Premiums are paid over the benchmark London Metal Exchange (LME) cash price to secure physical metal.

But buyers are reluctant to accept these offers.

"We want premiums to fall this time as we see slack demand and weaker premiums in the United States and Europe," an end-user said, citing $238 to $240 as their preferred range.

"Producers claim that aluminium inventory in Japan is declining and demand for automobiles and houses are solid, partially because of the government's stimulus programme," a trader said.

"But buyers don't see that has happened," he said, adding that $240 to $245 could be the appropriate range.

For the July-September quarter, Japanese buyers agreed to pay an average premium of around $250 per tonne over the London Metal Exchange cash price.

The LME in July proposed an overhaul of its warehousing system to cut long queues that some consumers say have inflated prices to get metal. Premiums in Europe have already begun to edge lower as a result.

In Japan, so far sellers have said they are not convinced a change in LME rules will affect domestic market given the rules won't affect any locations in Japan or nearby in Asia.

Buyers are uncertain over the scale of the impact any overhaul may have, given proposed changes won't come into effect until next year.

The latest quarterly pricing negotiations began this week between Japanese buyers and miners including Rio Tinto Ltd , Alcoa Inc and BHP Billiton , and are expected to continue to next month.

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