Japanese aluminum rolling mills and two producers of primary aluminum have started discussions on term volumes for the third quarter, ahead of the premium negotiations which are likely to start in the week beginning May 21, company sources said Monday.

The rolling mills want to secure their required volumes for the coming quarter as early as possible, as spot supplies are expected to stay tight, mill and producer sources said.

One source said a handful buyers had suggested securing the required volume for the remainder of the year.

Such requests had made it difficult to offer spot cargoes, as the producers in general need to plan for term customers first before selling spot, said one producer source.

Japanese term contract volumes range from 200-5,000 mt/month, according to market sources.

One mill source, however, added that there was a risk in securing long term volumes after July, as the Japanese manufacturers may be forced to operate at lower rates over July-September due to possible power shortages in the country.

Four major global producers have suspended spot offers since February as they have sold out their productions to term customers, following output cuts at the Kurri Kurri plant in Australia and the Hillside plant in South Africa, market sources said.

"It is very difficult to find spot sellers ... the another option is to buy London Metal Exchange aluminum contract warrants from warrant holders, but not many Japanese trading houses are willing to go through such lengthy processes," said one Japanese trader.

Spot premiums increased to $150/mt plus LME cash CIF Japan last Tuesday from $130-135/mt plus LME as a result, according to Platts' data.