News: S32 UPDATE 1-Japanese buyer agrees to pay Q3 aluminium premium of $127.5/T -source

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A Japanese aluminium buyer has agreed to pay a global producer a premium of $127.5 per metric ton over the benchmark price for shipments in July to September, as local demand remained sluggish, a source involved in the pricing talks said on Tuesday.

The figure is close to $125-$130 per ton paid in the April-June quarter but lower than the initial offers of $165-$180 per ton made by producers.

Japan is Asia's biggest importer of the light metal and the premiums PREM-ALUM-JP for primary metal shipments it agrees to pay each quarter over the benchmark London Metal Exchange (LME) cash price CMAL0 set the benchmark for the region.

The agreement came after protracted negotiations in which producers sought to raise premiums from the previous quarter while buyers wanted to cut levels, a source at a Japanese trading house told Reuters.

"We have agreed with a producer to take a middle ground on the both sides," the source said.

"Producers predicted tighter market due to higher overseas premiums, but buyers were not convinced as domestic demand remained weak with ample inventories," he said.

Aluminium stocks at three major Japanese ports AL-STK-JPPRT were at 354,000 tonnes at the end of May, according to Marubeni 8002.T , above 250,000-300,000 tons that are considered appropriate.

Still, other buyers have not settled yet, as they aim to win lower levels of $100-$110 per ton, the second source at another Japanese buyer said, adding another global producer has so far slashed its offer to $135 per ton from $165.

The sources declined to be identified because of the sensitivity of the discussions.

The quarterly pricing talks began in late May between Japanese buyers and global suppliers, including Rio Tinto (RIO) and South32 (S32) .

The negotiations are supposed to end before the start of the new quarter, but they have dragged on for a month longer than usual in the past two rounds due to a wide gap in two sides' market outlooks.