January 1 – “LME to raise rental charges to offset the fast load-out rates,” Al Circle
January 7 – “LME warehouses divided on new rules,” American Metal Market
January 7 – “COLUMN-New year, same old warehouse problems for London Metal Exchange,” by Andy Home, Reuters
The core underlying problem remains the yawning gulf between the cost of storing metal in exchange warehouses and storing it anywhere else. It is the reason why so much metal is still waiting to leave the LME system. And that problem, like the queues, is set to get worse, judging by the increases in rent and load-out charges that will kick in from the start of April.
January 7 – “LME boosts outreach strategy with new education offering,” London Metal Exchange
January 8 – “Scrap aluminium prices dip reflecting falling LME prices,” Al Circle
January 16 – “CME Group Aluminum Futures Weekly Update,” CME Group
January 26 – “London Metal Exchange’s ring, offices will move in 2016,” Metal Bulletin
The London Metal Exchange plans to relocate its premises, after more than 10 years at its headquarters on Leadenhall Street, as it moves to consolidate its businesses under one location.
January 30 – “Why Do Aluminium Physical Delivery Premiums Keep Rising?” Seeking Alpha
February 2 – “Aluminum industry body stops stocks data reports in blow to transparency,” Reuters
The International Aluminum Institute (IAI) has stopped reporting global inventory stocks, in another blow to transparency for a metal whose price, critics say, has been skewed by big banks and trading houses.
February 3 – “COLUMN-Another light goes out in the aluminum market,” by Andy Home, Reuters
February 4 – “Privacy fears define LME warehouse talks,” American Metal Market
The London Metal Exchange and its approved warehouse companies are trying to negotiate their respective paths around the challenging issues of incentives and client confidentiality that the exchange’s new warehousing regulations has raised.
February 5 – “LME rules raising ‘load-out’ questions,” American Metal Market
February 6 – “Response to the London Metal Exchange Consultations on Proposed Changes to the Warehouse Agreement and the Physical Delivery Network,” Alcoa
In response to the LME consultation on the Physical Delivery Network and proposed changes to the Warehouse Agreement, Alcoa believes that the LME is creating a path to increased disruptive intervention in physical markets, while continuing to focus on developing an exchange that caters to financial participants.
- The LME’s proposed changes to the Warehouse Agreement enhance the LME’s powers to intervene in physical markets and increase price volatility.
- The proposed structure of the Aluminum premium contract will not meet the needs of physical market participants.
- While the LME enhances its power to intervene in physical markets, it continues on a parallel path of developing its structure to cater to financial investors.
- The development of the LME into an exchange dominated by financial participants further dilutes the impact that supply/demand fundamentals play in the price discovery process, and creates a greater need for improved market transparency.
While we commend the LME for taking the initial step in providing the market with greater transparency by publishing its Commitment of Traders Report, Alcoa believes additional steps should be taken to improve market participants’ understanding of the price discovery process.
- The LME should publish an additional report for volume traded by COTR category. Given that market open interest only reflects existing positions as of a point in time, the LME should provide further transparency into the corresponding contract volume traded by segment.
- Those classified in the Broker Dealer / Index Trader segment should report both OTC and on-exchange positions by segmented category, including any volume that has been netted.
- Improved transparency into the average “Message Rate” (orders placed to orders executed) from the Managed Money segment, including information on the frequency with which the LME’s ratio limits are breached and the resulting actions taken by the LME, is needed to better understand the impact of High Frequency Trading.
February 10 – “Is the LME’s NASAAC Contract in Terminal Decline, or Facing a New Lease on Life?” Metal Miner
Almost ignored by those outside of the industry, the London Metal Exchange has two contracts that are still of immense potential value to the aluminum industry, or at least they should be when you consider the vast scale of the aluminum die-casting industry worldwide.
The LME has two contracts in addition to primary metal, the aluminum alloy contract which is defined as aluminum alloy conforming to A380.1, 226 or AD12.1 and the North American Special Alloy Aluminum Contract which is defined as aluminum alloy conforming to the LME NA380.1 specification (an LME modification of The Aluminium Association Inc. A380.1 specification [1989]) and is designed very much for the automotive industry.
February 11 – “UC Rusal Comments on LME Official Stock Decline Below 4 Mln Tonnes,” UC Rusal
UC RUSAL, a leading global aluminium producer, notes that official LME aluminium stocks fell below 4 million tonnes on 11 February for the first time since May 2009.
RUSAL notes that LME aluminium stocks keep declining and maintain a steady decrease of around 7 thousand tonnes per day. This drawdown reflects the Company’s view of the supply and demand balance on the global market excluding China which is currently in deficit. The fundamental demand for aluminium remains strong and RUSAL expects to see the stocks at LME warehouses to continue to decrease throughout 2015.
Premiums fill in the gap between the LME pricing mechanism and physical market. RUSAL’s expectation is that stocks (reported/unreported) are being delivered to the consumer market to address the supply deficit so up until today, there has been no significant downward pressure on premiums with the US and Asia still reporting premiums at record levels.
The Company forecasts that demand for aluminium will continue to grow despite concerns related to the Chinese slowdown. In RUSAL’s view, aluminum is less sensitive to the Chinese slowdown, in particular, due to big infrastructural spending. Outside China, the EU QE program should support the European economy in the second half of 2015. Cheaper oil is also likely to further promote consumption growth in G7 countries, India and China.