Chicago Metal Conference to focus on Discrepancy Between LME Prices and high Premiums

The discrepancy between low London Metal Exchange aluminum prices and record premiums for the metal will be among some of the topics discussed at a major metals conference taking place in Chicago next week.

Consulting firm Harbor Intelligence is sponsoring its annual aluminum outlook conference in Chicago June 11-13, which will draw industry attendees from all sectors, said Jorge Vazquez, managing director and founder of Harbor.

This is the fifth year Harbor has sponsored the aluminum conference, and between 225 and 250 people have registered. That’s a record, beating last year’s record attendance of 200, he said. Speakers and attendees range from banks, producers and consumers and include firms such as Novelis, Macquarie Bank and Aluminio Brasileiro.

Vazquez said the conference will cover topics across the aluminum supply chain, but he said specifically they are interested in a few particularly topics.

Many are looking to debate why there’s a discrepancy between the record premiums paid globally for aluminum while LME aluminum prices are hovering at sharply lower levels of around $2,000 a metric ton.

“Historically premiums and prices run in tandem,” he said. “So the question is will premiums come back down? Are they overvalued, or are LME prices undervalued?”

One reason for the potential discrepancy is that LME prices may be affected more by financial flows, while the scrap side is not influenced as much by speculative money, he suggested.

Vazquez said another topic of discussion will be able the recent wave of cuts by primary aluminum producers who have had to curtail output because of the low prices.

In December and January, several primary producers cut output based on negative economics, but just in the past two to three weeks new plants have been idled, including plants in New Zealand from Rio Tinto/Alcan and Norsk Hydro this week announced the shuttering of its Kurri Kurri plant. On top of this, there’s about 3.6 million tons of idled capacity in the Western regions.

This year a sizable number of attendees come from North and South America, which represent where much of the activity in the aluminum industry has occurred, he said.

“We’ve seen a lot of physical activity pick up. Transportation has been strong on the continents (North and South America) with the exception of Brazil, which has been a major cold spot,” he said.

There are fewer representatives from Europe than usual, which reflects the economic problems of the region, he said.

The weakness in aluminum prices has also hit those in the smelting side of the industry, with fewer of those representatives attending this year, he said.

This year there has been a rise in the number of attendees from the Middle East, where production is some of the cheapest globally.