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UPDATE 1-Japan Q4 aluminium premium drops 24% to $97/T amid dull demand -sources


Initial offers made by producers were $110-120/T


Stocks in major Japanese ports remain high, above healthy levels


Japan import of primary ingots fall 30% in Jan-Aug

(Adds quotes and details in paragraph 4-12)

By Yuka Obayashi

TOKYO, Oct 2 (Reuters) - The premium for Japanese aluminium shipments for the fourth quarter was set at $97 per metric ton, down 24% from the prior quarter, as demand remained dull at home and abroad, five sources directly involved in pricing talks said.

The figure is lower than the $127.5 per ton paid in July to September and the lowest since the January-March quarter this year. Producers had originally sought premiums of $110 to $120 per ton for the fourth quarter.

Japan is Asia's biggest importer of the light metal and the premium for primary metal shipments it agrees to pay each quarter over the London Metal Exchange (LME) cash price sets the benchmark for the region.

The results reflected languid demand and ample stockpiles in Japan, while weaker U.S. and European premiums also encouraged some buyers' aggressive attitude toward negotiations, a source at a trading house said.

Some Japanese buyers agreed

last week to pay a premium of $97 per ton.

Buyers had earlier insisted on $90-$95 due to even lower spot premiums but they compromised to end the negotiations faster than the last three rounds when the talks had dragged on for more than a month longer than usual, another source at a Japanese end-user said.

The quarterly talks began in late August between Japanese buyers and global suppliers, including Rio Tinto and South32.

"Demand from automakers is recovering with the easing of the chip scarcity, but appetite from other sectors such as construction stayed dull," a third source at a global producer said.

Japan's shipment of aluminium sheets and extrusions fell 4.6% in August on year, marking the 18th consecutive month of decline, data of the Japan Aluminium Association shows.

Amplifying oversupply concerns, aluminium stocks at three major Japanese ports totalled 360,700 tons in August, exceeding 250,000-300,000 tons that are considered healthy, according to Marubeni.

The high stockpiles came despite a 30% year-on-year cut in Japan's import of primary ingots in January-August, with those from Russia plunging by 65%, the trade data shows. Many Japanese companies have cut purchases of Russian supply after Moscow's invasion of Ukraine.

The sources declined to be identified because of the sensitivity of the discussions. (Reporting by Yuka Obayashi; Editing by Jamie Freed and Tom Hogue)