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Aluminum’s Premium Gains Being Fueled by LME Warehouse Rules, Harbor Says
Edited by : AL CIRCLE
2 min read
London Metal Exchange rules are creating delivery bottlenecks for aluminum that are boosting prices and causing seven-month delays at Detroit warehouses, commodity researcher Harbor Intelligence said.
Warehouses monitored by the LME, the world’s largest metals exchange, are obliged to deliver a minimum of 800 metric tons to 1,500 tons daily, even as global stockpiles of aluminum rose almost fivefold to 4.57 million tons since the end of 2007. Detroit’s warehouses hold 25 percent of LME-monitored inventory. The premium paid in the Midwest to get the metal on top of its cash price surged to a 16-year high last month.
The LME’s minimum-delivery rule “is one of the factors that, without a doubt, is behind record high Midwest premiums,” Jorge Vazquez, a senior vice president at Harbor Intelligence, said yesterday in an interview in Chicago. The higher premium “implies consumers paying a higher price for aluminum.”
Aluminum for delivery in three months has climbed 30 percent in the past year, and in May rose to the highest level since August 2008. The metal advanced $9, or 0.4 percent, to $2,550 a ton today on the London Metal Exchange.
Bottlenecks in the U.S. warehousing system combined with the use of aluminum for financing deals may have cut the amount that’s available even as total LME stockpiles remain near a record. Detroit, a city associated with the auto industry, is the only site holding more than 900,000 tons of the metal, according to exchange figures.
Warehouses monitored by the LME, the world’s largest metals exchange, are obliged to deliver a minimum of 800 metric tons to 1,500 tons daily, even as global stockpiles of aluminum rose almost fivefold to 4.57 million tons since the end of 2007. Detroit’s warehouses hold 25 percent of LME-monitored inventory. The premium paid in the Midwest to get the metal on top of its cash price surged to a 16-year high last month.
The LME’s minimum-delivery rule “is one of the factors that, without a doubt, is behind record high Midwest premiums,” Jorge Vazquez, a senior vice president at Harbor Intelligence, said yesterday in an interview in Chicago. The higher premium “implies consumers paying a higher price for aluminum.”
Aluminum for delivery in three months has climbed 30 percent in the past year, and in May rose to the highest level since August 2008. The metal advanced $9, or 0.4 percent, to $2,550 a ton today on the London Metal Exchange.
Bottlenecks in the U.S. warehousing system combined with the use of aluminum for financing deals may have cut the amount that’s available even as total LME stockpiles remain near a record. Detroit, a city associated with the auto industry, is the only site holding more than 900,000 tons of the metal, according to exchange figures.
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