No issue has dominated one of our metal markets as much as the ongoing warehousing conundrum has loomed over aluminum for the first half of the year. Even longer, in fact.
Back in March, the London Metal Exchange was forced to put on hold new rules it had proposed to end long wait times at its Detroit and Vlissingen, Netherlands, warehouses where long queues ended up skewing load-out times and prices of the lightweight metal. This was not the beginning of the load-in, load-out times odyssey. That started way back in 2013.
A recap for those of you purchasing or investing in aluminum or just following the drama at home:
- The London High Court ruled in March that the LME’s proposed load-in, load-out rules could not go into effect due to problems in the consultation process that provoked primary aluminum producer UC Rusal to file a lawsuit against the LME.
- In June Rusal began offering its customers the option of purchasing aluminum through the CME Group’s futures contract as well as the LME’s.
- In July, aluminum hit a 16-month high on the LME. Physical delivery premiums began to soar as well.
- Editor-At-Large Stuart Burns examined a massive shift in on-warrant stocks being liquidated around this time.
- In late July the UK Court of Appeals put off a decision on the LME’s appeal of the March ruling. Executive Editor Lisa Reisman said the appeal might not be decided until October.
That brings us to today. Aluminum’s still one of the hottest commodity metals on the market today, but the warehousing issue threatens to flood the market with previously unavailable metal as soon as a court in London rules. The cash to three months spread is down to just $17/ton on the LME’s largest aluminum contract.