JP Morgan Chase Sells Its Physical Commodities Business, Aluminum Falls

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JP Morgan Chase & Co. has struck a deal to sell its physical assets and trading arm to Swiss trader Mercuria Energy Group Ltd. for $3.5 billion in cash. JP Morgan Chase was one of many banks that bet heavily on physical commodities futures contracts such as aluminum.

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The deal, expected to be completed in the third quarter, marks the largest ever acquisition by Mercuria, the Wall Street Journal reported, a closely-held company founded in 2004 by Swiss traders Marco Dunand and Daniel Jaeggi that is relatively unknown outside the physical commodities trading industry.

Banks that had a hand in ownership of both physical commodities and the warehouses they were stored in were a source of complaints by both aluminum producers and buyers in recent months.

LME warehouse scheme infographic

The cash price of primary aluminum weakened by 1.1 percent on the LME, settling at $1,684 per metric ton. The aluminum 3-month price saw a 1 percent decline on the LME to $1,728 per metric ton. The day’s biggest mover on the LME was the cash price of primary Indian aluminum which dropped by 2.6 percent on Tuesday.

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Chinese aluminum closed mixed yesterday. The Chinese aluminum cash price fell 0.8 percent to a 30-day low on Tuesday. The price of Chinese aluminum scrap was unchanged. The price of Chinese aluminum billet continues hovering in a short range or the fifth day in a row. For the fifth consecutive day, the price of Chinese aluminum bar held flat.

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