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LME Update – from February 11 to March 10

February 13 – “Aluminium financing deals to keep metal locked up in LME -Rio Tinto,” Reuters

February 14 – “Warehouse firms walk away from reforming London Metal Exchange,” Reuters

“A bid by the London Metal Exchange (LME) to ensure clients can obtain aluminium faster from owners of warehouses in its global network risks eroding its function as the world’s top metals marketplace.

Some warehouse companies are starting to walk away.

Industry leaders and analysts say shed owners, who profit from keeping aluminium stockpiles in long-term financing deals or to earn rent, are preparing to move metal to depots that are beyond LME supervision.

This could mean the LME, bought by Hong Kong Exchanges and Clearing in 2012, will lose its unique grasp on the location and quantity of stored aluminium, which lends transparency to the market.”

February 18 – “Aluminium futures up 0.33 pc on overseas trend,” The Economic Times

February 18 – “Oversupply forces aluminium industry cuts,” by Xan Rice, Financial Times

February 18 – “Supply glut will keep pressure on aluminium prices -BHP Billiton,” Reuters

February 20 – “Russia’s Rusal fights metal exchange reforms citing human rights,” Reuters

“The London Metal Exchange (LME) risks having to repeat arduous preparations it made for reform of its global warehouse system if Russian aluminium giant Rusal wins a British judicial review on grounds including human rights.

United Company Rusal, the world’s largest producer of the metal, will seek court permission next week for the review, in hopes of quashing LME moves that may undermine the price at which it sells its products.

The Hong Kong-listed company argues that the LME actions will harm its economic interests and that there were flaws in the consultation and inquiry process adopted by the exchange.”

February 21 – “VIDEO: Europe’s aluminium premiums look less likely to fall,” MetalBulletinTV

February 21 – “VIDEO: European base metals outlook: Aluminum, copper & nickel markets’ undergo transition,” Platts

February 24 – “Aluminum Producers Offer Japan Buyers Record Premium,” Metal Miner

“Top aluminium producers have offered Japanese buyers a record premium of $370-375 per tonne for April-June primary metal shipments, up 45-47 percent from the previous quarter, four sources involved in quarterly pricing talks said on Monday,” reports Reuters.

“Japan is Asia’s biggest importer of the metal and the premiums for primary metal shipments it agrees to pay each quarter over the London Metal Exchange (LME) cash price set the benchmark for the region.”

February 24 – “Aluminium down 0.4% on global cues,” Business Standard

February 26 – “COLUMN-Aluminium market risks disappearing into the shadows,” by Andy Home, Reuters

“There’s a certain inevitability in this after U.S. premiums went super nova at the start of the year and European premiums started rising in their wake.  But the real issue is not the headline-grabbing rises in premium levels but the widening rupture in the core pricing mechanism of the 45 million tonne global aluminium market. 

The future for the light metal has never looked so bright, as it makes increasing inroads into the automotive sector.  But in terms of price discovery, aluminium risks slipping away from the light of exchange trading into the shadows of the over-the-counter market.”

February 27 – “London Metal Exchange airs concern on warehouse reform delays in court,” Reuters

“The London Metal Exchange voiced “serious concerns” over its ability to maintain an orderly base-metal market if forced to repeat a consultation to reform its global warehouse network, as Russian aluminium giant Rusal seeks a judicial review.

United Company Rusal, the world’s largest producer of the metal, is seeking court permission for a judicial review in hopes of quashing the LME moves it says may undermine the price at which the company sells its products.”

March 5 – “LME aluminium to retrace into $1,743-$1,752 range,” by Shoaib-ur-Rehman Siddiqui, Business Recorder

March 5 – “Low prices forcing aluminium smelters in China to cut output – trade,” Reuters

“China’s aluminium smelters are likely to shut about 2 million tonnes of operating capacity in the coming months as they try to limit losses amid falling prices and dwindling government support, industry sources said.”

March 6 – “European Al premiums hold ahead of LME rule change, Q2 buying,” Metal Bulletin

“European aluminium premiums have remained stable at record highs over the last month, as a dip in spot activity and the looming changes to London Metal Exchange warehouse rules have failed to drag levels lower.

Metal Bulletin’s duty-paid aluminium premium stands at $340-370 per tonne, while the duty-unpaid range remains at $285-310 per tonne. Some market participants have reported slightly lower numbers in the last week, after February’s spot activity sank from the elevated levels in January when premiums first reached today’s record highs.”

March 7 – “Midwest aluminium premiums slip,” Metal Bulletin

“Midwest aluminium premiums dropped again this week as market sources fretted about increased import volumes and the potentially chilling impact of a cold winter on demand.”

March 10 – “Growing stocks of aluminium lead to long queues, high premia,” by Kunal Bose, Business Standard

“When 2013 world production, rising 4.5 per cent to 49.631 mt, trailed consumption by 726,000 tonnes, why should the three-month LME price be as low as $1,725 a tonne? The principal market spoiler is the rise in global inventory to 15 mt, including a record 5.5 mt with LME-registered warehouses, where stocks have increased fourfold since the 2008 financial crisis. It is also stocked in ‘stealth shades’ in and outside China. The huge inventories are due to investors borrowing money at very low interest to buy for storing in warehouses cheaply. Financing deals in aluminium continue to gain currency. The prevailing system allows investors to sell the metal immediately, making use of the future price structure. As traders have seized aluminium for collateral in financing deals, the physical market outside China has seen a deficit. According to Barclays, the deficit this year would rise to 1.1 mt from 726,000 tonnes in 2013. It is arrived at after adjusting for surplus in China. Principally due to China, global production could rise despite contraction in output in Europe, the US and Australia, as groups there are left with no alternatives to switching off high-cost smelters to protect profits.”

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