LME

The London Metal Exchange wants to grow its electronic trading marketplace. Executives at the world’s biggest and oldest market for industrial metals believe they can grow it quite rapidly if the right conditions are put in place. Paul MacGregor, the exchange’s head of sales, said at an LME event in Chicago that the group is in a position where it has a good electronic trading platform and good participation in it, but needs more volume.

Free Download: Cut Your Aluminum Shipping Costs

The Hong Kong Exchanges and Clearing, Ltd.-owned LME still uses open outcry trading. That system works great for actual metal users, but the professional traders and bank traders that the LME would like to have participating are used to a faster pace.

{ 0 comments }

LME Aluminum for three-month delivery has fallen back below the $1,800-per metric ton level from over $2,100 in the third quarter of last year. The prospect of a disorderly unwinding of the stock and financing trade, which, until recently, had locked up large amounts of aluminum in deals, is causing a chilling effect in the entire aluminum market.

Free Download: Shipping Cost Certainty for Overseas Aluminum Deals

Physical delivery premiums are also falling worldwide. Reuters reports that South Korea’s state stockpiler bought 2,000 mt of aluminum at a premium of $330/mt over LME cash.

{ 0 comments }

If you can put off buying your aluminum until next month you may get a lower price than right now.

Free Download: Cost Certainty for International Aluminum Purchases

That is what recent reports seem to be suggesting. We have written extensively on falling aluminum physical delivery premiums with the first chink in the producer’s armor showing in Europe this quarter and in negotiations for Q2 prices in Japan. As lower physical delivery premiums work their way through to product producers the price of extrusions and rolled products should ease during Q2. For the first time in years the physical delivery premium looks vulnerable.

{ 0 comments }

The London Metal Exchange continues to move forward with reform of its warehouse rules even if, for those unfamiliar with the situation, the reform appears to be going at a glacial pace.

Free Download: Secure Shipping Costs for International Trades

The challenge the 138 year old exchange faces is primarily one of trying to balance competition law across the 37 international locations in which it operates – what is legally enforceable in Baltimore may not be in Bremen or Busan. The LME has to move cautiously, give all parties the opportunity to discuss, review and agree to changes and, above all, try to avoid getting dragged into London’s High Court as Rusal so cynically did last year in an attempt to stall changes which it saw potentially damaging to the aluminum price.

Still in the cards are new rules to cap or ban rents for metal held up in exit queues, a move that, most agree, would result in a rapid deterioration of the load out queue as any incentive to keep the queue in place would evaporate the moment the rule change went into force. There is also discussion about capping the level of daily rents, possibly in recognition that millions of tons have been lost to the LME system as metal has flowed into non-LME warehouses under the stock and finance trade.

{ 0 comments }

Could this be the beginning of the end of overblown aluminum physical delivery premiums?

Free Download: Trading Large Quantities? Ensure Cost Certainty

Consumers certainly hope so, and although it’s long been predicted the sudden fall in European physical delivery premiums has taken the market by surprise. According to Reuters, premiums paid over the LME cash price were mostly quoted in a range of $385-$420 a metric ton for duty-paid material in Rotterdam, compared to premiums of $430-$480 just last week.

{ 0 comments }

Something is certainly amiss in the copper market.

Free Download: Save on Your Copper Trades

For a market that is supposedly in surplus, the World Bureau of Metal Statistics estimates a 105-kiloton surplus for 2014. The forward prices are in sharp contango as this graph from the London Metal Exchange shows.

{ 0 comments }

The widely accepted narrative for copper is we are in a state of oversupply, driven by an excess of concentrate and a cooling demand picture for refined metal. The relentless fall in the copper price is the strongest evidence of this.

FREE Download: The Monthly MMI® Report – covering the Copper market.

Yet at the same time inventory levels, usually taken as an indicator of supply and demand balance has been falling as this graph from HSBC’s recent Global Metals & Mining Quarterly shows. In particular the fall in LME inventories appears to suggest a very tight market.

{ 0 comments }

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.

FREE Download: The Monthly MMI® Report – covering the Aluminum market.

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.

{ 0 comments }

To say the aluminum market is a game of two halves is maybe a silly distortion of an equally silly saying, but in many ways the market in China and the market in the rest of the world almost exist in distinct but parallel universes. A graph from HSBC’s excellent “Quarterly Global Mining and Metals Review” illustrates the point rather well.

FREE Download: The Monthly MMI® Report – covering the Aluminum market.

Yet, in reality, it is the tight nature of the North American market, just 8% of the whole, that is driving sky-high physical delivery premiums, as we mentioned in Friday’s post. Asian consumers, as a result, are having to pay ever-higher premiums in spite of high inventories and cooling demand.

{ 0 comments }

An interesting article in Thomson Reuters’ Inside Metal publication by Andy Home this week explores the question of when physical delivery premiums will come down and the London Metal Exchange price of aluminum will again represent a fair market price for the metal.

FREE Download: The Monthly MMI® Report – covering the Aluminum market.

Japanese first quarter premiums have just been set at $425/ton over the cash aluminum price on the LME. As the article points out just $5/ton over the last quarter but compared to $255 this time last year and $114 the year before it represents an increasingly massive disconnect between the LME and the true market price. It also highlights another disconnect in the aluminum market: Japan is sitting on excess stocks of primary aluminum and generally there is an oversupply situation in much of Asia but premiums are rising – driven, the article explains, by the North American market where premiums are hitting $535 per metric ton.

{ 0 comments }