LME Vows to Fix Stubborn Aluminum Warehouse Bottlenecks, Spot and 3-Month Prices Up

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The London Metal Exchange today said it is taking further steps to improve operations at its warehouses, as changes introduced on Feb. 1 have had little impact on aluminum warehouse bottlenecks for physical delivery.

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Large queues have built up at some of the warehouses dotted around the world that are operated under the LME’s rules. That has caused financial pain, but also operational inconvenience to companies that use aluminum.

The new rules introduced recently included forcing warehouses with a supply bottleneck of more than 50 days to take more metal out than they have taken in until waiting times fall.

Today, however, the LME recognized that more has to be done to satisfy both the Financial Conduct Authority, which regulates the LME’s operations, and more broadly, the users of the aluminum market.

In documents published on Monday, the LME said it would launch another round of consultations through March 30. It will also provide more details in its weekly Commitment of Traders report, to help make information more widely available, and launch an aluminum premium contract, which has been under discussion for some time, in October.

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Following a three-day flat streak, the price of Chinese aluminum billet dropped by 0.9% to end at CNY 12,830 ($2,051) per metric ton on Friday, February 27. After three straight days of no change, the cash price of Chinese aluminum decreased by 0.7% to CNY 12,820 ($2,049) per metric ton. Friday saw the price of Chinese aluminum bar drift down 0.7% to CNY 13,610 ($2,175) per metric ton after three quiet days. The price of Chinese aluminum scrap was unchanged at CNY 12,500 ($1,998) per metric ton.

At $1,816, the aluminum 3-month price finished the market day on the LME up 0.8% per metric ton. On the LME, the cash price of primary aluminum increased 0.8% to $1,798 per metric ton. The Indian aluminum cash price inched up 0.7% to INR 111.60 ($1.81) per kilogram.

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