Aluminum Suppliers Offer $114-115/Ton 1st-Qtr Premium To Japan Buyers

Aluminum suppliers are offering first-quarter contract premiums to Japanese buyers around $114 to 115 a metric ton as negotiations for January-March shipment start against a background of soft domestic demand, suppliers told Dow Jones Newswires.

First-quarter charges are expected to settle lower than their fourth-quarter level of $118/ton-119/ton due to lower consumption as auto makers--major consumers of the light metal--cut production following flooding in Thailand that has reduced parts supply, traders and producers said.

Ongoing concerns over the effect of the euro-zone debt crisis on demand for metals and consumer goods are adding to bearish sentiment, a major supplier to the Japanese market said.

"Looking at the international situation...it's reasonable to feel that the premium should go down," he said.

Substantial inventories in Japan are also weighing on premiums, a Tokyo-based trader said.

"The inventory of unsold metal is high."

He forecast a settlement of $114/ton-115/ton, significantly higher than current spot premiums around $100/ton.

"The market's been very weak recently and the buyers have been very quiet," he said.

The slower spot demand and macroeconomic jitters have pressured aluminum futures on the London Metal Exchange.

Three-month aluminum was trading around $2,120/ton on the LME at 0600 GMT Friday, down 19.4% since the start of August.

Still, market participants say aluminum could take near-term support from capacity suspensions at high-cost operations in China, where many smelters can't make profits at current price levels.