It was an enlightening morning for attendees of the “Prospects for an All-In Contract & 2014 Metal Price Forecast” webinar as representatives from CME Group and MetalMiner addressed rising Midwest Premiums for aluminum and possible solutions to the present situation.
From the MetalMiner side, Lisa Reisman, Executive Editor & Co-Founder, and Stuart Burns, Editor-at-Large & Co-Founder, kicked off the webinar by assessing the current stock and finance aluminum conundrum, which has been characterized by low interest rates and shed rents. Meanwhile, many leading financial institutions, with their revenues down, have been pulling out of commodity trading. Heightened regulation and governmental oversight have only added to the pain experienced by metal buyers.
Reisman and Burns maintained that aluminum buyers in today’s market cannot rely on strictly fundamental analysis and, while they should never anticipate the market, it is crucial they understand how prices ebb and flow in order to mitigate their risk.
CME Group introduces new aluminum contract
Joining MetalMiner on the webinar was Fred Penha, Director of Metals Products at CME Group. Penha introduced the Physical Aluminum Futures Contract, which he categorized as a financially and physically settled futures contract that allows metal buyers to hedge now and take advantage of transparent access to open interest and warehousing.
Webinar attendees learned just why the current LME contract no longer functions as a vehicle for price discovery and is an outdated forum for metal buyers who are motivated by the ability to manage all their price risk at once.
As part of the webinar, MetalMiner provided a 2014 aluminum price forecast and projected where Midwest Premiums are headed. Attendees were polled on where they think aluminum prices are headed and whether or not they currently or have ever hedged on an exchange.
The webinar closed with a lively Q&A session from what turned out to be an active and engaged audience. Reisman, Burns and Penha took turns fielding questions from the attendees and closed out what was an illuminating experience for all involved.