As the current warehousing issues associated with the London Metal Exchange (LME) continue, we will be publishing periodic updates, compiling information found online as the situation develops. This post includes the week of February 3-10, as well as a video that appeared on January 20th.
January 20 – “Aluminium premiums smash records” (video), Metal Bulletin TV
February 4 – “LME aluminium to remain above $1,670,” Business Recorder
“LME aluminium may hover above a support at $1,670 per tonne or rebound to $1,709, as indicated by its wave pattern and a Fibonacci projection analysis.”
February 5 – “New contract to hedge high aluminium premium,” by Xan Rice, FT.com
“Aluminium traders and the London Metal Exchange are in advanced discussions over a new contract that will allow consumers to protect themselves against the cost of the surging premiums for the metal.
Demand for a hedging tool has mounted in recent weeks as the gap between the physical aluminium market and the official LME benchmark price has widened leaving industrial buyers exposed.”
February 5 – “LME Says Warehousing Reforms Bearing Fruit,” by Laura Clarke, The Wall Street Journal
“The LME said it looked at five warehouses that had been affected by lengthy queues, but there was some doubt about its conclusion that overall queues had shrunk.
Wait times increased at LME-registered warehouses after aluminum and other metals became financing tools in the wake of the global financial crisis. Producers sold or pledged metal to traders and banks to raise working capital, with the result that the aluminum was locked up in warehouses out of the reach of buyers such as beer-can manufacturers. […]
But BNP Paribas senior metals strategist Stephen Briggs said the data may show a more uncertain picture. While the proportion of zinc held in LME stocks and that has been requested for delivery has fallen sharply, to 30% from a high of nearly 70% in June 2013, “aluminium overall is still at a very elevated 45%, and that is the problem metal.” “
February 7 – “Metals demand to remain ‘reasonably strong’ in 2014, but down on year: JP Morgan,” Platts
“Demand for base metals from China should remain “reasonably strong,” aided by recovery from developed markets in 2014 — although down from 2013 — JP Morgan said in research released Friday.
Looking at premiums, one physical trader said there was no change and “nothing to report.””
February 7 – “U.S. judge sets aluminum-rigging litigation in motion,” by Andrew Longstreth, Reuters Legal
“Over the last six months, roughly 30 lawsuits have been filed alleging that the London Metal Exchange (LME) and other defendants – including investment banks Goldman Sachs Group Inc and JPMorgan Chase & Co and merchants Glencore Xstrata and Trafigura AG – manipulated the warehousing of aluminum in order to lift the price of the metal. The lawsuits accuse the banks and other defendants of hoarding metal in warehouses, driving up the prices of industrial products from soft-drink cans to airplanes. Plaintiffs argue that the LME abetted the scam by writing rules that made it possible and by ignoring calls to change.”
February 10 – “South Korea’s PPS stockpiles aluminium, copper and tin,” Metal Bulletin
“PPS [South Korea’s Public Procurement Service (PPS)] bought 800 tonnes of good-western aluminium from STX Corp at a premium of $300 per tonne over London Metal Exchange cash price. On Thursday February 6, other aluminium, copper, and tin tenders were closed. Prime Global won the tender to supply 1,000 tonnes of good western-origin aluminium ingot at a premium of $281 per tonne over LME.”
February 10 – “Aluminum faces first deficit in nine years on output cuts: Sumitomo,” by Jae Hur and Ichiro Suzuki, Livemint and The Wall Street Journal
“Japanese trading house Sumitomo Corp., which has stakes in smelters from Brazil to Australia, forecast aluminium will swing into a deficit next year for the first time since 2006 as lower prices accelerate output cuts.
“Global demand will outpace supply by 37,000 metric tonnes in 2015 from a surplus of 312,000 tonnes estimated for this year,” said Shingi Yamagiwa, manager of light metals trading at the Tokyo-based company.”