Reuters reported that term aluminum premium talks between Australian suppliers and Japanese buyers are not making progress with Rio Tinto and BHP seeking USD 114 per tonne to USD 115 per tonne premium and Japanese buyers aiming for a level below USD 110 down from USD 118 in the Q4.

Mills and traders said that settlement for the January to March quarter premium will likely be delayed into the middle of this month due to the wide price gap. Japan is the world's biggest aluminum importer with domestic consumption of 2 million tonnes per year, equivalent to about 5% of global demand.

An official at an aluminum mill said that we haven't tabled a counter offer since we received the first offer from suppliers of around USD 114 to USD 115 late last month. We aim for a premium below USD 110. Suppliers are bullish on the back of a relatively tight market and recent financing deals involving banks, while aluminum mills are worried about shrinking demand.

Domestic demand in Japan is slowing after devastating floods in Thailand caused many Japanese firms to curb output of consumer goods using parts made in Thailand while the strong yen is curtailing exports of Japanese goods. Aluminum is used in products ranging from computers to planes.

The premiums for the Q4 of 2011 the amount paid above LME cash prices, which on Friday traded around USD 2,103 per tonne were settled at around USD 118 per tonne. That was down slightly from the USD 120 level in July to September which was the highest in a year.

Amid prospects of a slowdown of the economy and demand, some trading companies expect Japanese mills may reduce the volume on annual term deals in favor of spot deals.

(Sourced from Reuters)