Alcan eyes individual deals in Japan aluminium premium talks

Rio Tinto Alcan has declined to set an indicative price in quarterly premium talks due to kick off next week with Japanese buyers of primary aluminium, and will instead negotiate individual deals, two sources involved in the talks said.

The company told buyers in a letter on Friday it did not intend to use as a bargaining tool a supply halt caused by a force majeure event at its refinery in Oman from July 19 to August 16, said the sources, who declined to be identified.

Instead, Alcan, a unit of global miner Rio Tinto (RIO.L), will negotiate with buyers individually on the premiums for the October-December shipments, the sources quoted the letter as saying.

Buyers pay a premium in addition to the LME cash price to cover freight and insurance and to reflect regional supply and demand.

In June, Japanese aluminium buyers, the world's biggest importers of the metal, had agreed on a record high physical premium of $200-$210 per tonne for the July-September quarter after global smelters cut output.

"We cannot help but talk about a higher level for the October-December quarter because of the spot premium exceeding $210," said one of the sources, who asked not to be identified in the absence of authorisation to speak to the media.

The Japanese buyers fear Alcan's move is designed to test their appetite for supplies in a tight aluminium market, due partly to large stocks locked up by banks in financing deals.

Typically, in such financing deals traders buy physical metal and simultaneously sell forward at a profit, while striking a warehouse deal to store it cheaply in the interim.

"Alcan says negotiations will be held individually, but there is still a possibility that it will provide us an indicative price after it talks to some of the buyers," the second source said.

Japan is the biggest importer of aluminium due to a lack of smelters, though its consumption of around 2 million tonnes per year accounts for only about 5 percent of global demand.