Japan Q2 aluminum premiums mostly set at $380 per metric ton, down 11 percent from Q1

Japan's aluminum premiums for April-June shipments were mostly set at $380 per metric ton, down for the first time in six quarters on higher inventories and slumping spot premiums, six sources directly involved in the talks said.

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 set the benchmark for the region.

Five buyer sources and another source at one of the producers said most shipments were booked at $380 per metric ton, down 11 percent from a record $425 in the January-March quarter.

"We urged producers to drastically cut premiums as stocks have piled up and spot premiums have come down to as low as around $350 here and overseas premiums have also lost ground," a source at a fabricator said.

Aluminum stocks held at three major Japanese ports rose for an eleventh month to hit a record high at the end of February, buoyed by high imports as China ramped up exports of semi-manufactured products, leaving regional producers searching for buyers for their surplus metal.

Spot premiums fell globally for the first time last month, after soaring around nine-fold since 2009 amid backlogs at LME-registered warehouses of up to two years to access the metal.

Spot premiums have already dropped 10-15 percent in Asia, Europe and the United States and are expected to tumble by another 40-50 percent this year.

As a result, producers have been forced to lower their second-quarter offers for buyers in Japan from initial proposals of premiums between $390 to $425.

"Producers apparently made compromises quickly as they figured that longer negotiations would not produce better results this time," a source at a trading house said.

The previous round of negotiations for the January-March premiums dragged on for nearly two months.

The latest pricing talks for April-June premiums began late last month between Japanese buyers and global miners including Rio Tinto Ltd, Alcoa Inc and BHP Billiton.

Negotiations are still continuing between some global miners and buyers.