Q4 marks 3rd straight quarterly decline
Producers' initial offers were $98-$103 per ton
Drop driven by weak domestic demand and high inventories
Adds comments and details in paragraph 4-11
By Yuka Obayashi
TOKYO, Oct 24 (Reuters) - The premium for aluminium shipments to Japanese buyers for October to December was set at $86 per metric ton, down 20% from the previous quarter, reflecting weak demand, five sources directly involved in the pricing talks said.
The figure is lower than the $108 per ton paid in the July-September quarter and marks a third consecutive quarterly decline.
Japan is a major Asian importer of the light metal and the premiums PREM-ALUM-JP for primary metal shipments it agrees to pay each quarter over the London Metal Exchange (LME) cash price CMAL0 set the benchmark for the region.
Pricing talks between Japanese aluminium buyers and global producers such as Rio Tinto RIO.L, RIO.AX and South32 S32.AX, began early in September and were expected to conclude by the end of the month. But they stretched longer than usual as both sides struggled to close a wide gap.
Producers initially offered premiums of $98-$103 per ton for October-December quarter, down 5%-9% from the previous quarter.
One producer later cut its offer to as low as $97, but buyers pushed for levels in the $80s, citing spot premiums in the $70s.
Producers eventually compromised at $86 this week, and buyers agreed, even though their bids had remained in the low $80s, a source at a Japanese fabricator said.
"Domestic demand remained sluggish, especially for construction materials", the source said, adding high inventories also kept bids in the $80s.
Aluminium stocks at three major Japanese ports AL-STK-JPPRT rose to 341,300 tons by the end of September, up 1.8% from the previous month, according to trading house Marubeni 8002.T.
"We cut offers to reflect slow demand and meet buyers' voices," a producer source said, noting that sellers held out for higher levels until last week, as rising premiums in the United States and Europe were expected to tighten supplies in Asia.
The sources declined to be identified due to the sensitivity of the matter.
(Reporting by Yuka Obayashi; Editing by Christian Schmollinger and Louise Heavens)
((Yuka.Obayashi@thomsonreuters.com; +813-4520-1265;))