Premiums charged to Japanese purchasers of aluminium are likely to fall in the second quarter to around $58 a tonne or lower, as demand drops in the world's second largest economy, industry officials said on Thursday.

Japanese primary aluminium buyers are seeking premiums of around $55 or less for supplies for the second quarter, down from $58-$62 a tonne in the first quarter, they said.

As it looks now, I think the talks will eventually narrow down to a level around $58, or slightly under, a participant to the talks said.

A second official, also involved in the talks, said the talks were nearing a settlement.

It's looking like it will settle at somewhere around mid-$50 or slightly higher, he said.

Negotiations on term deals have made slow progress as Japanese buyers, faced with a supply glut, had initially refrained from suggesting a premium level as there was little incentive to buy in a deepening recession.

Some industry sources had initially said offers were as high as around $60-$62, a bullish figure sellers had justified by arguing demand was strong elsewhere in Asia, notably in China.

Suppliers, which include mining giants such as BHP Billiton (BHP.AX: Quote)(BLT.L: Quote) and Alcoa Inc (AA.N: Quote), have since cut their offers to premiums of $57-$60, industry sources said.

Many industry officials doubt whether China's purchases are an accurate reflection of current end-user demand for the metal used in transport and packaging, noting the buying was being done by the country's State Reserves Bureau.

China, the top producer and consumer of aluminium, imported 60,074 tonnes of unwrought aluminium and semi-finished products in February, up 6.6 percent from January, as Chinese prices had stayed stronger after the SRB bought 590,000 tonnes of primary metal in December-February. [ID:nnHKG256060]


Some term buyers said they did not require fresh supplies for the second quarter.

We may not even need to make new purchases for the third quarter either, one end-user said.

He said his company had trimmed stocks to what it deemed an appropriate level for the end of March, adding that he expected the volume to be sufficient to cover demand for the time being.

The Japanese buyers involved in the talks include trading houses and aluminium mills.

Latest data continued to paint a stark picture for Japan's export-oriented economy.

A rise in inventories made Japan's fourth-quarter slump slightly less severe than initially reported, but further darkened the gloomy outlook for the nation by highlighting tumbling demand for Japanese goods. [ID:nnLC709331]

Japan's aluminium metal imports in January amounted to close to 171,000 tonnes, up 6.0 percent from a year earlier, most recent government data shows.

The year-on-year rise was attributed to shipping schedules, not a recovery in demand for the metal, which has tumbled as automakers, major consumers, curb production.

I think we'll see the (import) figures sink from March to about May, the second company official said. (Editing by Anthony Barker)

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