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UPDATE 1-Japan aluminium premiums climb to $108/T in Q3, up 3% -sources

* July-September premiums mark second straight quarterly increase

* Higher premiums reflect tighter supply in Asia

* Fears over lower demand from semiconductor sector caps gains (Adds details)

TOKYO, June 21 (Reuters) - Premiums for Japanese aluminium shipments for July to September were set at $108 per tonne, up 3% from the current quarter, as tighter supply in Asia outweighed fears over weakening demand, five sources directly involved in the pricing talks said.

The new figure is higher than the $105 per tonne premiums PREM-ALUM-JP in the April to June quarter and marks a second straight quarterly increase. Producers had sought premiums of $115 to $120 per tonne for the third quarter.

Japan is Asia’s biggest importer of aluminium and the premiums for primary metal shipments it agrees to pay each quarter over the London Metal Exchange (LME) cash price set the benchmark for the region.

“We had signed all of our July-September term contacts at $108 a tonne by early this week,” a source at a producer said.

Spot premiums in Asia have risen due to fewer shipments of semi-fabricated metal from China to other Asian countries due to stronger aluminium prices on the Shanghai Futures Exchange (ShFE), the source said.

Semi-fabricated metal, or semis, can be melted down for use as primary metal.

But slower demand from China for the light metal, used in semiconductors and the machinery to make them, as well as worries over further weakness in demand due to an escalating U.S.-Sino trade conflict capped gains, said another source at a trading house that also signed its July-September contracts at $108 a tonne.

Japan’s exports fell for a sixth straight month in May as China-bound shipments of semiconductor manufacturing equipment and car parts weakened. The falling shipments indicate a deteriorating outlook for growth as Japan’s trade-reliant economy faces persistent pressure from slowing external demand.

The latest quarterly price negotiations began late last month between Japanese buyers and global producers, including Rio Tinto , South32 Ltd and Alcoa Corp .

Reporting by Yuka Obayashi; Editing by Tom Hogue