UPDATE 1-Premiums for Japan aluminium imports in Q1 fall to 2-year low

* Jan-Mar premiums mark the lowest since Oct-Dec 2016

* Lower premiums reflect slumping spot premiums amid ample supply

* Buyers, traders expect Japan premiums to rise later this year

* TABLE: Japan aluminium premiums (Adds quotes and details)

TOKYO, Jan 11 (Reuters) - Premiums for aluminium shipments to Japan for January to March were agreed at their lowest in more than two years as spot premiums fell amid ample supply, said multiple sources directly involved in the pricing talks.

The deals were mainly done at premiums of $85 per tonne, with a few deals done at $83 and $84, the sources said.

The new premiums are down between 17 percent and 19 percent from a premium of $103 per tonne in the previous quarter, marking the second consecutive quarterly drop and the lowest since the fourth quarter of 2016.

The final prices came below the initial offers of $91 to $93 a tonne made by producers.

Japan is Asia's biggest importer of aluminium and the premiums PREM-ALUM-JP for primary metal shipments it agrees to pay each quarter over the benchmark London Metal Exchange cash price set the benchmark for the region.

“We have settled the majority of deals at $85 a tonne but some deals were signed at $83,” a source at a Japanese buyer said.

Another source at an end-user said most of deals were struck at $85 a tonne, while some deals were done at $84.

Three other sources at Japanese trading houses and another source at a producer said all contracts were done at $85 a tonne, after producers compromised and came down from initial offers as local spot prices were holding near $70-$80 per tonne.

The sources all spoke on the condition of anonymity due to the sensitivity of the matter.

The few softer deals came because some economic indicators suggested a slowing of the economies of China and the United States late last year, and as news that U.S. sanction on Russian aluminium giant Rusal would be lifted raised concerns for a further supply glut, one of the sources said.

The U.S. Treasury announced on Dec. 20 that it would lift sanctions on the core empire of Russian businessman Oleg Deripaska, including Rusal and its parent En+, watering down the toughest penalties imposed since Moscow’s 2014 annexation of Crimea.

Despite lower premiums for the current quarter, many buyers, smelters and traders forecast that premiums would rise in and after April, when demand usually picks up.

The latest quarterly pricing talks began in late November between Japanese buyers and global producers, including South32 Ltd, Rio Tinto and Alcoa.

Reporting by Yuka Obayashi; Editing by Christian Schmollinger and Tom Hogue