CME Group Inc. Tries to Take Aluminum Price Risk Off Table

The CME Group is trying to persuade buyers to make use of their US Midwest aluminum premium futures contract, in light of the LME warehousing scheme affecting small buyers all the way up to processors such as Novelis.

Reuters reports that “The premium on U.S. Midwest aluminum has increased to nearly 9 cents a lb from 4 cents a lb over the past three years, and is now a larger component of the aluminum consumer’s cost and risk, CME said.” However, is this a viable option for most buyers?

RELATED: Analysis–Will CME’s Aluminum Swaps Heat Up?  

If you’re a buyer, let us know if you’d consider premium futures – leave a comment below!

For its part, Novelis is still looking on the bright side after reporting a lower adjusted EBIDTA and fewer net sales in the first quarter of fiscal 2014. “Despite the challenges we faced in the first quarter, we maintained financial discipline through good cost control and will continue this focus on cost containment going forward,” said Phil Martens, President and Chief Executive Officer for Novelis, in a statement. “In addition, our global strategic expansions and favorable demand trends supported by the 2014 World Cup in Brazil and automotive material substitution towards aluminum sheet will also help drive our business forward in the second half of this fiscal year.”

Steve Fisher, Novelis’ CFO, said, “We’ve made good progress reducing inventory levels at the end of the first quarter and are continuing to drive working capital efficiencies and take other actions to improve free cash flow going forward.”

The aluminum cash price rose 2.9 percent on Friday, August 9, making it the day’s biggest mover on our price index. After two days of falling prices on the LME, it closed at $1,781 per metric ton. Following a 2.8 percent rise last Friday, the aluminum 3-month price closed on the LME at $1,828 per metric ton.

The Indian aluminum cash price finished the market day up 2.2 percent per kilogram.

* Get the complete prices every day on the MetalMiner IndX℠

The Chinese aluminum cash price gained 0.3 percent. The price of Chinese aluminum scrap continues hovering in place for the fifth day in a row. The price of Chinese aluminum billet showed little movement last Friday. The price of Chinese aluminum bar remained steady.

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