*

Q2 premium marks first quarterly drop in five quarters

*

Settles below initial offers of $245-$260

*

Material flows remain largely unchanged despite U.S.

tariffs

(Adds quotes and details in paragraph 4-11)

By Yuka Obayashi

TOKYO, March 31 (Reuters) - The premium for aluminium

shipments to Japanese buyers for April to June was set at $182 a

metric ton, down 20% from the current quarter, as demand

remained dull at home, six sources directly involved in pricing

talks said.

The figure is lower than the $228 per ton paid in January to

March and marks a first quarterly decline in five quarters, but

it remains below initial offers of $245 to $260 per ton made by

global producers.

Japan is a major Asian importer of the light metal and the

premiums for primary metal shipments it agrees to

pay each quarter over the benchmark London Metal Exchange (LME)

cash price set the benchmark for the region.

"The aggressive initial offers were based on expectations

that U.S. tariffs would push Canadian aluminium from the U.S. to

Europe, driving up the U.S. premium and redirecting metal bound

for Asia to North America," said a source at a Japanese rolling

mill.

"But so far, only a uniform aluminium tariff has been

implemented, leading to little change in material flows," the

source said, noting the final agreement reflects weak domestic

demand.

U.S. President Donald Trump imposed a 25% tariff on all

steel and aluminium imports into the United States, effective

March 12.

However, he suspended 25% tariffs he had imposed early

March on most goods from Canada and Mexico. The exemptions for

the two largest U.S. trading partners, expire on April 2.

"Global suppliers had to compromise to align with local

spot premiums, which were around $170 or lower," said another

source at a Japanese trading house.

Japan's demand from automakers and the construction

sector remained sluggish, even as aluminium stocks at three

major Japanese ports fell 3.5% in February from

the previous month to 313,400 tons, according to Marubeni ( MARUF )

.

Quarterly pricing talks began in late February between

Japanese buyers and global suppliers, including Rio Tinto

, and South32 ( SHTLF ).

The sources declined to be identified due to the

sensitivity of the matter.