Aluminum Premiums To Fall After LME Warehouse Plan?

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Jorge Vazquez of Harbor Intelligence recently spoke with Bloomberg, noting that “spot premiums for aluminum ingot will probably fall in the next few quarters after the London Metal Exchange’s decision yesterday to change the rules on warehousing to reduce waits for metal.”

These were his comments made via email to Bloomberg:

“The LME’s ruling is an official acknowledgment that the LME warehousing system that was in operation was being used as a platform to inorganically inflate aluminum premiums at the expense of the aluminum consumer and at the benefit of some warehouses, banks and trading companies.

‘‘The decision taken by the LME in principle seems to be intended to help reduce the gap between what the LME is today and what an efficient, fair, transparent and balanced market should be.

‘‘Spot ingot premiums should fall in the quarters ahead toward more organic levels while the LME price may experience an upward re-pricing as the market factors in better conditions to purchase and load-out physical aluminum in the LME and expectations of falling LME inventories.’’

The Indian aluminum cash price saw the biggest increase at 1.2 percent, for Thursday, November 7. Following a 1.0 percent rise on Thursday, the 3-month price of aluminum closed on the LME at $1,830 per metric ton. After falling for two days, the primary aluminum cash price rose 1.0 percent on the LME to $1,784 per metric ton.

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Chinese aluminum prices were flat for the day. The price of Chinese aluminum scrap was unchanged. Chinese aluminum billet stayed flat. The price of Chinese aluminum bar held steady. The Chinese aluminum cash price showed little movement on Thursday.