LME’s New Attempt to Fix its Aluminum Pricing? Premium Contracts

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The London Metal Exchange on Monday said it would offer a new way for aluminum buyers to protect themselves from the rising cost of accessing metal from the exchange’s network of warehouses, as reported in The Wall Street Journal.

A regional aluminum premium contract will allow consumers such as beverage companies and automakers to hedge against the premiums paid to producers on top of the price of metal, and is the latest attempt by the LME to reform its contentious global warehousing system.

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The new contract will be physically-settled, will initially be for aluminum in North America, Western Europe and Asia, with the potential for other metals if demand proves sufficient. It will sit alongside the LME’s existing global aluminum contract.

The Indian aluminum cash price fell 5.0 percent on Monday, April 7 to INR 106.65 ($1.78) per kilogram, making it the day’s biggest mover. On the LME, the primary aluminum cash price gained 1.6 percent to finish at $1,810 per metric ton. On the LME, the aluminum 3-month price rose 1.3 percent to $1,845 per metric ton.

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Chinese aluminum prices closed flat for the day. For the fifth consecutive day, the price of Chinese aluminum scrap held flat at CNY 12,250 ($1,972) per metric ton. The price of Chinese aluminum billet saw essentially no change for the fifth day in a row, remaining around CNY 13,590 ($2,188) per metric ton. The price of Chinese aluminum bar held steady at CNY 14,200 ($2,286) per metric ton. The Chinese aluminum cash price ended a two-day climb, settling at CNY 12,740 ($2,051) per metric ton.

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