* Aluminium Q1 deals slip 6 pct from Q4 2012 record of $254
* Deals represent bottom offer from a producer
* Alcoa, BHP asking for higher terms, yet to settle
By Osamu Tsukimori
TOKYO, Dec 12 Japanese buyers have agreed an
aluminium premium of $240 per tonne with Rio Tinto Alcan
for some January to March shipments, down from a record
this quarter, reflecting easing demand as the world's third
largest economy slips into recession.
The terms, according to three sources, were at the bottom
end of a range of offers by producers, below $247 offered by
Alcoa and $249 offered by BHP, two of the sources said.
The deals, expected to be agreed as soon as next week, will
set a benchmark price for the region. Premiums are paid over the
benchmark London Metal Exchange (LME) cash price to secure
Still, premiums remain lofty, more than double this year's
first quarter terms of $112 and down just 6 percent from a
record $254 to $255 for the current quarter.
They have been inflated mainly due to large stocks locked up
by banks in financing deals, and behind long queues at
warehouses, which make it difficult for manufacturers to access
"The main reason is lower demand in Japan itself," said
Daniel Briesemann, commodities analyst at Commerzbank in
"Japanese aluminium consumers have gained more power in the
negotiations, due to the fact that there is lower (automotive)
production in Japan, and therefore lower demand for aluminium.
But if we see signs that demand is picking up, I think we will
see higher premiums again," he added.
A fall in the fee for buyers in Japan, who are Asia's
biggest importers of the metal, will be the first in more than a
Demand has deteriorated in the country's domestic auto and
electronics sectors, while its exports have been hit by a global
growth slowdown and a territorial dispute with China.
Japan's economy contracted for a second straight quarter in
July-September, indicating that weak global demand nudged the
export-reliant economy into a mild recession.
Toyota Motor Corp also expects Japan vehicle sales
to fall by a fifth next year, in part due to the end of
government tax incentives for fuel-efficient automobiles.
"Some deals have settled at $240 with Rio. Others are still
in talks," a source at a global aluminium producer said. "(Rio)
seems selling quite well so far, better than what they had
Negotiations with Alcoa and BHP are likely to be set some
time next week, said a source at a trading house in Japan.
"A benchmark price range of $240-$245 does not look
peculiar," the source told Reuters.
Financial deals that lock up stocks typically involve
traders buying physical metal and simultaneously selling forward
at a profit, while striking a cheap storage deal in the interim.
High premiums and government subsidies have helped keep
afloat many smelters that would otherwise have been forced shut
by a drop in global prices.