Offers represent 18-27% increase from Q1 Buyers say the offers...

• Offers represent 18-27% increase from Q1
• Buyers say the offers were not acceptable levels
• Spreading coronavirus weigh on aluminium demand

(Adds quotes and details)

Global aluminium producers have increased their offers to Japanese buyers for the second quarter by as much as 27% from the current quarter, three sources directly involved in the pricing talks said on Wednesday.

Smelters have offered primary metal shipments for the April to June period at premium of between $98 to $105 a tonne, the sources said.

For the January to March quarter, Japanese buyers agreed to pay a premium of $83 per tonne PREM-ALUM-JP , down 14% from the prior quarter.

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

"One smelter has offered $105 a tonne while another producer has proposed $98 late last week," a source at a Japanese buyer said.

"But given faltering demand in the wake of the coronavirus outbreak and spread, those are not acceptable levels," he said, adding that his company would bid $75 a tonne.

The coronavirus epidemic that started in China has spread to some 80 nations and disrupted global economic activities, mainly in China where it has killed nearly 3,000 people and infected more than 80,000.

Another source at a producer said the higher offers reflected firmer spot premiums in South Korea and a stronger European market.

"But the negotiations may take longer than usual as it is not clear how much impact the disease would have on the global economy and supply chains," he said.

The latest quarterly pricing negotiations began late last month between Japanese buyers and global producers, including Rio Tinto RIO.L (RIO) , South32 Ltd (S32) and Alcoa Corp AA.N , and are expected to continue until later this month.

Even before the spreading coronavirus, the aluminium market was struggling with a lack of demand and a downturn in sales to the automotive sector.