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Some Japanese aluminium buyers agree Q2 premium at US$129/T, up 25 pct from Q1

[TOKYO] Some Japanese aluminium buyers have agreed to pay a premium of US$129 per tonne for shipments from global producers in the April to June quarter, reflecting soaring US spot premiums, two sources directly involved in the pricing talks said on Monday.

The new premium is 25 percent higher than the $103 per tonne premiums PREM-ALUM-JP in the current quarter. The premium is the highest in three years and marks the second quarterly increase in a row.

Japan is Asia's biggest importer of aluminium 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.

The quarterly pricing negotiations began last month between Japanese buyers and global producers, including Alcoa Corp , Rio Tinto and South32 Ltd, with initial offers for premiums ranging between US$132 and US$135 a tonne.

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The increase reflects a surge in US spot premiums to the highest in almost three years after US. President Donald Trump flagged a 10 per cent import duty, as buyers sought to secure metal before higher costs come into force.

Mr Trump pressed ahead last Thursday with the import tariffs but exempted Canada and Mexico and offered the possibility of excluding other allies, backtracking from an earlier "no-exceptions" stance.

US spot premiums for Comex aluminium reached to around US18.5 cents a pound last week, highest since April 2015.

"We struck deals at US$129 per tonne with three producers last week after securing that level below their initial offers," a source at a Japanese trading house said.

A source at another trading company said his company agreed to US$129 per tonne for some of its contracts, but other buyers said they were still negotiating as fallout from the US tariffs was not entirely clear.

On Friday, Mr Trump said he has spoken with Australian Prime Minister Malcolm Turnbull and that they are working on an agreement so Australia would not be subject to US tariffs on steel and aluminium.

"Global suppliers which have smelters in Australia may raise their offers once the exemption is confirmed as it is by far more profitable to bring metals to the US than to Asia even after paying transportation costs now," the first trading house source said.

"But we may see higher supply in Asia as some metals to be shut out from the US may head to Asia, which could weigh on premiums," a source at a fabricator said.