No Benchmark For 1Q 2009 Japan Aluminum Premiums Yet -Traders

SINGAPORE -(Dow Jones)- Japanese aluminum premiums for the first quarter of 2009 remain under discussion, said traders at major Japanese houses Wednesday. Various media reports have suggested agreements with major international producers range from $55 to $64 over the London Metal Exchange cash price, but no figure within this range is being quoted as a benchmark. "We are still negotiating," said a trader at a Japanese trading house which is a major buyer at the quarterly negotiations. He said the situation remains in flux, adding although some deals have been done, the premiums quoted in media reports are high, in his opinion. "Why should you buy at that level when stocks (inventories) are high and spot premiums are so low?" Japanese premiums for good western brand aluminum, which are set on a quarterly basis, are regarded as a benchmark for the Asian region. The negotiations between global aluminum producers and trading houses which supply large consumers from the manufacturing and construction sectors are now into their fourth week. Traders reported spot premiums in Japan have fallen as low as $20-$30 over the cash LME price compared with fourth-quarter contract premiums set at $75-$77 over cash LME. "Some consumers are skipping the first-quarter contracts altogether," said a senior metals futures trader at a different Japanese trading house. He added he wasn't directly involved in the negotiations. This drawn-out discussion period is likely to result in lower aluminum purchases in the first quarter compared with previous quarters and some excess aluminum finding its way into LME warehouses. "I think we'll see 200,000-300,000 tons more (aluminum) inventory (on a global basis) head into LME warehouses in the first quarter," said the first trader. LME inventories total 1,930,300 tons, up 71% since the start of August. At 0738 GMT, three-month LME aluminum was at $1,490 a metric ton, up $19 from Tuesday's kerb. -By James Campbell, Dow Jones Newswires;