* Oct-Dec premiums mark second quarterly decline
* Lower premiums reflect weaker spot premiums
* Producers' initial proposals were at $100-110/T (Adds comments, details)
By Yuka Obayashi
TOKYO, Oct 11 (Reuters) - Japanese aluminium buyers will pay up to 21 percent less in import premiums in the October-December quarter to reflect a slide in spot premiums, five people directly involved in quarterly pricing talks said.
Aluminium premium (PREM-ALUM-JP) was set at $94 to $95 per tonne for metal to be shipped in the fourth quarter, down 19.5 percent to 21.0 percent from $118 to $119 per tonne in the previous quarter, the sources said.
Japan is Asia's biggest importer of aluminium and the premium over the London Metal Exchange (LME) cash price that its buyers agree to pay each quarter for primary metal shipments sets the benchmark for the region.
The latest agreement marks a second straight quarterly decline.
"We have settled the deals at $94 a tonne with three producers we buy the metal from," a source at an end-user said. He declined to be named owing to the sensitivity of the talks.
A source at another fabricator said all the deals were signed at $94 or $95 a tonne while another source at an end-user said his company has agreed with all of the suppliers to pay between $94 and $95 a tonne.
Another source at a producer said most of the deals were settled at $95 a tonne.
The quarterly pricing negotiations began in late August between Japanese buyers and global producers, including Rio Tinto , South32 Ltd., Alcoa Corp and Rusal, with initial offers at $100-110 a tonne.
Buyers initially countered at around $85 and $90 a tonne due to weaker spot premiums in Asia, but some signed at $95 by the middle of last month.
"We wanted $90 or lower level, but we had to compromise as the U.S. premiums have started rising in recent weeks," one of the sources said.
"Producers were saying that they would expect to see Asia premiums rising later this year and next year, but we don't have a sense of tightness in our market at least for now," he said.
Spot premiums have weakened in Japan amid ample supply in Asia despite the recent surge in the prices for the light metal and solid local demand from the automobile sector.
Aluminium price hit a five-year high of $2,199 per tonne last month amid concerns that capacity cuts in top producer China, where the government is waging a war on pollution, will create shortages.
(Reporting by Yuka Obayashi; Editing by Vyas Mohan)