* Rio revises premium offer to $350/T from $250/T

* Higher proposal reflects stronger overseas premiums

* Freight and insurance costs rise amid Iran crisis

By Yuka Obayashi

TOKYO, March 11 (Reuters) - Rio Tinto

has raised its aluminium premium offer to Japanese buyers to

$350 per metric ton for April-June primary metal shipments, up

79% from the current quarter, due to fears the escalating Middle

East crisis will tighten supply, two sources said.

The revised offer is 40% higher than Rio's previous proposal

of $250 and, if accepted, would be the highest since the

April-June quarter of 2015, when the premium reached $380 a ton.

Japan is a major Asian importer of the metal 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.

In late February, global producers offered Japanese buyers

premiums of $220 to $250 per metric ton for April-June, up

13%-28% from the current quarter, reflecting higher overseas

premiums.

But they pulled, or let the offer expire, as they assessed risks

from the Middle East conflict to cargoes transiting the Strait

of Hormuz.

"Behind the higher offer is stronger European and U.S. premiums

and rising freight and insurance costs," one source directly

involved in the quarterly talks said.

The sources declined to be named due to the sensitivity of the

matter. Rio Tinto declined to comment.

The war in the Middle East, which accounts for around 9% of

global aluminium supply, has rattled the light metal market by

effectively freezing shipments via the strait.

Qatari smelter Qatalum began shutting down production and

Aluminium Bahrain, which runs one of the world's

biggest smelters, declared force majeure on shipments.

Japan imported about 20% of primary aluminium ingots from

the Middle East in 2025.

Premiums for aluminium in South Korea have increased sharply

since the end of February.

Japan's quarterly pricing negotiations began last month and

are expected to continue through late March.