A global aluminum producer has offered Japanese buyers third quarter contract premiums at $130/mt plus London Metal Exchange cash, CIF Japan, which is 66% lower than Q2 premiums of $380/mt plus LME cash CIF, buyer and seller sources in the negotiations said Friday, May 29.

A second global producer has offered $160/mt plus LME cash CIF, two Japanese traders said.

Two Japanese buyers said $130/mt was not acceptable as they were seeking a larger reduction in the quarterly premiums, of more than 74% or at less than $100/mt plus LME cash CIF Japan.

The buyers also said they were waiting for offers from a third producer who held meetings with Japanese buyers this week.

The third producer had suggested $170/mt plus LME cash CIF Japan and said he would revise his offer as buyers were seeking lower premiums, according to two buyers.

Buyers added they understood $170/mt plus LME cash CIF Japan was not a firm offer.

The second and third producers could not be reached for comment.

Spot aluminum premiums have been falling globally amid a supply glut. The Japanese spot premiums fell to $110-$130/mt plus LME cash CIF Japan on May 20, down from the record high level of $425/mt plus LME cash CIF Japan on January 20.

The negotiations typically involve four or more overseas suppliers and 15-20 Japanese buyers including trading houses, rolling mills and extruders, for over 50,000 mt/month of primary aluminum ingot as well as value-added products such as alloy, billet and slab.

The negotiations started this week in Tokyo.

Japanese trade and consumer sources said they were seeking premiums of $60-$80/mt plus LME cash CIF Japan, as recent local tender award levels were below Yen 240 ($1.93)/kg delivered.

The import premiums were calculated at $70-$80/mt plus LME cash.

But overseas trade and producer sources said Japanese import and local markets are separate, with different players.

"We have to sell the metal at $70-$80/mt plus LME cash to local customers, so it is frightening to buy at $100/mt or higher," said one Japanese trader.

"Japanese consumers know there are ample stocks, that they can bid lower," said a second trader.

Meanwhile, one overseas trader, who sells to Japan on a spot basis, said he would not sell below $130/mt plus LME cash CIF Japan as he has been able to sell at higher premiums elsewhere in Asia.

A second overseas trader said he had done several deals of 100-1,000 mt lots at $150-$200/mt plus LME cash CIF Bangkok for June, July and August deliveries this month.