Last week Russia's PGM export agency, Almazjuvelirexport (Almaz), told its Japanese customers it was ready to sell PGMs for August-December shipments this year.

The offer included palladium ingots, which Japanese want most, as well as palladium sponge, platinum and other PGMs.

The offer was made nearly seven months after the previous supply contracts between them expired last December, which has caused a long delay to Russian PGM exports to Japan.

A trader at a major Japanese trading firm said his firm was likely to sign a contract with Almaz this week."We expect to reach an agreement this week, probably based on the terms offered by Almaz," he said. "Although the offering prices are higher than levels agreed under lastyear's contracts, they are not so bad."

But the company is likely to buy a smaller amount of metals under this year's contract than last year, in line with slower demand from end-users, the trader said.

"High palladium prices have discouraged end-users from buying the metal. In the electronics sector, companies have been speeding up the process of substituting palladium with nickel," he said. "We will probably reduce the purchase amount."

If contracts are signed, the company will get the first PGM shipment from Russia in September, as it has already secured sufficient metals to cover demand for August, he said. An official at a Japanese bullion house which has asked Almaz to lower prices said it would take time before agreement was reached.

Almaz offered to sell palladium and platinum at premiums over the London fix market.

"Under a long-term contract, we receive metals weeks after setting prices for them. Considering the current high lease rate for palladium, the offered terms were not good forus," the official said. "If Almaz does not make a concession, we don't mind not signing supply contracts this year."

One-month palladium lease rates stayed high at about 35 percent on Monday, reflecting tight supplies.

Meanwhile, a number of traders said they were not interested in signing contracts with Almaz, as they were fed up with repeated suspension of Russia's PGM exports to Japan and they no longer trusted Russia as a reliable supplier.

Russia suspended PGM exports to Japan in the first half of 1997 and again in the first seven months of this year.

"We have already rejected the offer from Almaz, by sending a fax saying that we don't want to sign a contract with them this year," another trader said. "It is meaningless to sign contracts with Russia, as we cannot expect stable supplies."

The trader said his company will regularly purchase PGMs from a Western dealer, as well as buying on the spot market.

"In the supply talks, Almaz said Russia is able to supply as much palladium this year asit did last year," he said. "Russian metals will flow into the market sooner or later, giving us a chance to buy them at lower prices."