March 25, 2019 / 10:33 AM / a month ago

UPDATE 1-Japanese aluminium buyers agree to Q2 premium increase, first time since Q3 2018

* Deal marks 24-27 pct hike from Q1 and first rise in 3 quarters

* Global smelters originally sought $109-112/T

* Lower China export, Japan traders’ lower stocks help tighten mkt (Adds comments and background)

By Yuka Obayashi

TOKYO, March 25 (Reuters) - Japanese aluminium buyers agreed to purchase supplies for April to June at premiums that are as much as 27 percent higher than the previous quarter as spot premiums have climbed, five sources directly involved in the pricing talks said.

The new premium PREM-ALUM-JP was set at $105 per tonne, up from the the $83 to $85 per tonne premiums in the January to March quarter, the sources said. This is the first increase in three quarters.

Producers had originally sought premiums of $109 to $112 per tonne for the second 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.

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

One of the sources, who works for Japanese trading house, said Japanese aluminium supply has tightened because of seasonal demand for beverage cans ahead of the summer.

“Many Japanese trading companies have trimmed inventories ahead of the end of their financial year on March 31, which also helped tighten local supply and bolster spot premiums, especially for the April and May shipments,” he added.

Lower exports from China of aluminium in semi-fabricated product form which can be melted down for use as primary metal was behind a tighter market in Asia, especially in South Korea, the sources said.

China’s aluminium exports fell to 343,000 tonnes in February, down 37.9 percent from January’s record high of 552,000 tonnes.

Still, producers had to lower their original offers as local inventories remained at relatively high levels, the sources said.

Aluminium stocks held at three major Japanese ports AL-STK-JPPRT at the end of February rose 1.7 percent to 319,700 tonnes from the previous month, Marubeni Corp said earlier this month.

“Given the recent tightness in spot market, especially for the near-term contracts, we expect spot premiums in Japan to stay at around $110 for a while, but it may change depending on state of Chinese economy and volume of exports from China,” one of the buyer sources said. (Reporting by Yuka Obayashi; editing by Christian Schmollinger)

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