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.
January 12 – “LME looking to launch U.S. aluminum premium contract,” by Josephine Mason, Reuters
“The London Metal Exchange is considering launching a U.S. aluminum premium contract, a senior executive said, potentially expanding its most-traded product after years of criticism over high physical prices.
The contract, plans for which are still in the early stages, would reflect the cash premium that is paid on top of the LME benchmark for physical delivery, Matt Chamberlain, head of business development, told Reuters.”
January 15 – “NADCA Submits Testimony to Senate Committee on Aluminum Pricing and Supply,” NADCA
“The North American Die Casting Association (NADCA) submitted formal testimony to the Senate Banking Subcommittee on Financial Institutions and Consumer Protection for the hearing titled, “Regulating Financial Holding Companies and Physical Commodities.”
“Long lead times, supply shortages, outmoded contract terms, and illogical pricing contribute to instability in the aluminum market. This drives down manufacturing productivity and encourages customers to seek overseas suppliers,” said NADCA President Dan Twarog.
This is the second Senate hearing investigating ownership of metals warehouses by banks and holding companies and their relationship with the London Metals Exchange (LME). Aluminum is one of the metals central to the warehousing investigations and subject of three lawsuits against holding companies such as Goldman Sachs, which own metals warehouses. …
To view the NADCA testimony submitted to the Senate Banking Subcommittee, click here.”
January 16 – “Aluminium premiums go supernova” by Andy Home, Reuters
“The Detroit queue, according to aluminium users such as Novelis and MillerCoors, has served artificially to inflate the physical premium in the U.S. market. The LME agrees, which is why it has changed its rules to force faster load-out at affected warehouses from May.
The aluminium queue at Detroit, however, has simply grown ever longer. It is now a nominal 410 days, assuming a daily load-out rate of 3,000 tonnes.
That’s working days. LME warehouse operators, however, charge rent by the calendar day. And Metro, which dominates LME storage in Motown, charges more than anyone else.
On that basis the rent on a tonne of aluminium cancelled today would be around $275 until it is ready for loading on to a truck, which will cost another $39.95. The total cost of getting aluminium out of Detroit, therefore, is around $315 per tonne.”
February 3 – “LME OFFICIALS: Aluminium reaches new four-year low in official session,” Metal Bulletin
“Aluminium settled at its lowest price since July 2009 in the official session on the London Metal Exchange on Monday February 3, with technical selling a stop to any nascent rallies. Three-month aluminium settled at $1,701/701.50 per tonne, from its opening price of $1,705 per tonne. The contract last settled below $1,700 per tonne on July 17, 2009. The light metal reached a high of $1,707.5 per tonne, while trading as low as $1,694 per tonne.”
February 3 – “Japan’s domestic spot aluminum trade picks up on low LME prices,” Platts
February 3 – “Two OK’d for aluminum warehousing in Ky.,” AMM
“Pacorini Metals USA LLC and Grupo BTG Pactual SA have been approved to warehouse aluminum by the Owensboro Riverport Authority in Kentucky.”
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In addition, the February 2014 issue of Light Metal Age will feature a discussion of Warehousing, Financing Deals, and the Future of Metal Exchanges with in the article, “Arabal 2013 – 30th Anniversary – Part I: Global Aluminum Outlook and Challenges” by contributing editor Andrew Hall. To receive your copy of the issue, subscribe here.