Two Japanese aluminum buyers agree to pay record premium of $420 in fourth quarter: sources

September 9
1:55 AM 2014

Two Japanese aluminum buyers have agreed to pay a producer a record premium of $420 per tonne for metal to be shipped in the October-December quarter, two sources directly involved in the quarterly pricing talks said on Friday.

Japan is Asia's biggest importer of aluminum 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.

A buyer struck the deal this week with Rio Tinto Ltd which proposed the $420-a-tonne premium last month, as the offer stood below other producers' proposals that ranged between premiums of $435 and $460, said a source who declined to be named.

Another buyer also decided to accept the Rio's offer as it came far below rival offers, another buying source said.

Rio Tinto could not be reached by phone to comment.

Other producers involved in the pricing negotiations include Alcoa Inc, BHP Billiton and United Company Rusal.

The Rio deal marks a 3-5 percent hike from the July-September quarter premiums of $400-$408 per tonne, which were up 8-12 percent from premiums in the prior quarter.

But many other buyers, including trading houses and end-users, have not struck any deals yet, buying sources said.

"The supply in Japan and the rest of Asia is not as tight as the United States and Europe. We are not convinced by producers' requests for higher premiums," an end-user source said.

The price negotiations, which began last month, are expected to continue for the next couple of weeks.

Top aluminum producers have pushed up their premiums on primary metal for October-December shipments to Japan as smelter shutdowns have squeezed supplies, sources involved in the talks said last month.

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