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TOKYO (Reuters) - Rio Tinto Alcan has written to Japanese buyers asking them to pay arecord premium of $200 per tonne for July-September primaryaluminium shipments, citing tight supplies, two sources directlyinvolved in the talks said on Monday. That compares with average premiums of $121-$122 paid over theLondon Metal Exchange cash price in the current quarter. Buyers paya premium in addition to the LME cash price to cover freight andinsurance and to reflect regional supply and demand. The demand was made in a letter sent late last week ahead of theofficial start of negotiations this week. The talks are set tocontinue for the coming three to four weeks. Supplies are tightening fast after struggling aluminium producers,squeezed by rising power and labour costs and weak prices, shutdown smelters and cut back on output earlier this year. Alcan cited relatively solid demand and the low likelihood of banksreleasing aluminium stocks held through financial deals, one of thesources said. Such financial deals - in which traders buy physical metal andsimultaneously sell forward at a profit, while striking a warehousedeal to store it cheaply in the interim - have recently become moreprofitable as the difference between nearby and forward prices haswidened. Japanese buyers are resisting such a steep increase in premiums,citing uncertainties over demand in the summer, given a potentialdecline in run rates at aluminium plants due to power shortages. Japan's output of rolled aluminium products in March rose 3 percentfrom a year earlier, the first rise in 13 months, on strong demandfrom auto and tin industries. Japan is the biggest importer of aluminium due to a lack ofsmelters, though its consumption of around 2 million tonnes peryear accounts for only about 5 percent of global demand. Russia's UC RUSAL Plc, the world's biggest aluminium producer,posted this month an 84 percent drop in first-quarter net profit asprices fell. BHP Billiton , the world's largest miner, said this month it would consolidateits stainless steel materials and aluminium divisions into a singlebusiness unit of larger scale, ready to benefit from future growthin emerging economies. Rival miner Rio Tinto announced last year it would sell 13 assets and has since taken aheavy writedown for its aluminium business. Thomson Reuters 2012 All rights reserved SUBSCRIBE to Mineweb.com's free daily newsletter now. The e-commerce company in China offers quality products such as China African Lace Fabric , China African Gele Fabric, and more. For more , please visit African Lace Fabric today!
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