March 11 – “Antitrust suits vs. LME, banks to go on,” American Metal Market
“A federal judge is allowing three groups of plaintiffs to pursue separate lawsuits against Goldman Sachs Group Inc., JPMorgan Chase & Co., their warehousing businesses and the London Metal Exchange. The suits, filed late last year on behalf of dozens of domestic aluminum suppliers and consumers (amm.com, Dec. 17), accuse the companies of conspiring to reduce aluminum supplies and increase aluminum prices by manipulating warehouse inventories.”
March 13 – “Aluminum May Trade Marginally Down,” Investing.com
March 14 – “HKEx named as co-defendant in LME aluminium lawsuits,” Reuters
“Hong Kong Exchanges and Clearing Ltd said on Friday it had been named a co-defendant in class action lawsuits involving the price fixing of aluminium on the London Metal Exchange (LME).“
March 18 – “CME Group to Launch North American Physically Delivered Aluminum Futures,” CME Group
CME Group announced it will launch North American physically delivered Aluminum futures contracts to begin trading on May 5, 2014, pending all regulatory approvals. This new contract will build on CME Group’s existing suite of base metals products, including the Aluminum MW U.S. Transaction Premium Platts (25MT) futures contract, which was introduced in April 2012. These new Aluminum futures contracts will offer global aluminum market participants a new tool for managing their exposure to volatile North American prices, while giving them access to physical aluminum at a number of CME Group-approved warehouses across the U.S.
“Aluminum is an indispensable part of our daily lives and is used in everything from building materials and transportation to packaging and wiring,” said Harriet Hunnable, CME Group Metals Products Managing Director. “Our customers want a North American physically deliverable aluminum futures contract from CME Group that provides them with greater transparency. Together with our Aluminum Midwest U.S. Premium contract, this new benchmark will enable industry participants to better hedge their North American aluminum price risk.”
March 21 – “State control said distorting aluminum market,” American Metal Market
“State-owned companies don’t make decisions based on market forces but instead—particularly in China—prioritize goals such as employment, Robert E. DeFrancesco III, partner at Washington-based law firm Wiley Rein LLP, said March 19 at the Aluminum Extruders Council’s annual meeting in Coral Gables.
“We see factors at play in their decisions as to investments and expansions in capacity that do not relate in any way to demand forces,” he said. “This obviously has a distortive effect on trade flows both at the level of production where they are and downstream products.””
March 24 – “CME lays down the gauntlet to LME in North American Aluminium market,” Scrap Register
“The CRU aluminium conference has provided the setting for the launch of the CME’s ‘all-in’ North American aluminium contract, geared towards solving the hedging challenge created by the surge in physical premiums.
Barclays does not believe this contract will have any near-term effect on premiums. However, if financial and physical liquidity can be achieved alongside a lack of delivery queue issues, then the LME will have a serious competitor in the North American market.
. . .
The main conclusion from the largely consumer audience was that they welcomed the contract, most importantly in terms of the possible benefit regarding hedge accounting, which needs to be understood in the context of the increasingly sizeable un-hedged premia price component when using the LME benchmark. There was a general acceptance, however, that achieving enough liquidity and participation to support its contractual usage along the aluminium supply chain versus the long dominant LME benchmark would likely take at least several years.”
March 27 – “High Court of Justice Enters Judgement on UC Rusal’s Claim Against the London Metal Exchange,” UC Rusal
“Following a claimant case brought by RUSAL against the London Metal Exchange at the High Court of Justice, the presiding judge, Mr Justice Phillips found in favor of RUSAL.
The award was issued in favor of RUSAL by Mr Justice Philips, who found that the LME’s original consultation and subsequent proposed rule change, were unlawful because fairness required the LME to consult on alternative options and, in particular, the option of the banning or capping of rents.
As a result of this ruling, the LME’s original decision will be quashed and they will be required to carry out a fair and lawful consultation process which addresses the concerns of a number of market participants raised prior to and following the initial consultation process.“
March 27 – “Rusal derails London Metal Exchange plan to cut warehouse queues,” Reuters
March 27 – “LME decision may stir price confusion,” American Metal Market
“A decision by the United Kingdom’s High Court of Justice to block new London Metal Exchange warehouse rules could create confusion over the direction of prices and regional premiums and perhaps impede the ability of the exchange to address antitrust concerns in the United States, according to industry analysts.
The market had been expecting the new rules to go into place April 1, an assumption that has been suddenly and unexpectedly proven wrong (amm.com, March 27), the analysts said, noting that it is no longer clear whether or when new rules might be implemented.”
“We are very disappointed with the outcome of the legal process in the UK,” said Martens. “We have worked closely with the LME and other stakeholders for two-and-a-half years to push for changes. Unfortunately, Rusal’s unilateral action resulting in this court decision will stifle the LME’s proposal to alleviate the unprecedented backlog at LME warehouses and will be very destructive to the market.
“It is indefensible that queues of more than a year exist at warehouses and unconscionable that players in the aluminum market are actively working to maintain the status quo to protect artificially inflated premiums. The divergence between the LME price and the physical market price is undermining the credibility of the industry’s pricing discovery process and causing havoc in the fabricating and consuming end of the industry. This is a global issue.
April 1 – “COLUMN-No winners from LME’s legal setback: Andy Home,” Reuters
April 2 – “LME aluminium to drop to $1,780,” Business Recorder
April 3 – “Metals warehousers to tread warily despite UK court ruling,” Reuters
“Big warehouse owners, under regulatory scrutiny for tying up huge amounts of aluminium in profitable storage, are unlikely to risk seeking a fresh influx of metal even though a UK court ruling last week set back attempts to rein them in.
. . .
“I think the warehouse operators will be a little cautious in suddenly saying that’s the end of that,” said analyst Grant Sporre at Deutsche Bank. “There will be another round of consultations and there will be some form of some restrictive ruling that disincentivises the warehouse operators to build these queues.”
The court ruling last Thursday halted only one reform, which would have forced depot operators to deliver more metal out than they took in. A raft of other new measures remain in place.”
April 3 – “Aluminium jumps after halt to LME plan,” Financial Times
April 7 – “LME To Offer Hedging Tool For Aluminum Buyers – Regional Premium Contract Designed To Tackle Rising Costs,” The Wall Street Journal
“The London Metal Exchange Monday said it would offer a new way for aluminum buyers to protect themselves from the rising cost of accessing metal from the exchange’s storage network.
A regional aluminum premium contract will allow consumers such as can- and auto makers to hedge against the premiums paid to producers on top of the price of metal, and forms the latest part of the LME’s contentious reforms to its global warehousing system.
Premiums–surcharges paid on top of the LME price for metal handling and delivery–have been rising in part because of lengthy queues at LME delivery locations such as Detroit and Vlissingen, the Netherlands. These wait times, which can stretch to more than a year, have formed as a result of financing deals that pledge metal as collateral.
The new contract, which will be physically-settled, will initially be for aluminum in North America, Western Europe and Asia, with the potential for other metals if demand proves sufficient. It will sit alongside the LME’s existing global aluminum contract.”