LME postpones aluminium premium contract to Q2 2015 and hold off further reforms

London Metal Exchange (LME) has announced on Thursday that they will be releasing their aluminium premium contract later than initially planned in the second quarter, according to Reuter’s report. They also said that they will refrain from any other reforms until they receive the court ruling.

The Hong Exchanges and Clearing Ltd owned LME had announced in June that they would be releasing their aluminium premium quarter in 2015 Q1.

The premiums are charges that are imposed over the LME price taking into account the regional demand and supply as well as cover costs of transport and insurance. The premiums have been rising to record numbers in recent years which makes the premium contract a lucrative option for investors who want to lock in the premium amount and reap the benefits later.

The high premiums have been largely caused due to warehouse backlogs that have raised many complaints against LME-certified warehouses. Industrial buyers who used aluminium to make beverage cans and transport had to wait reportedly two years for delivery.

LME said on Thursday that they are looking into the backlog issue and they are trying to rectify the situation in the new contract by a “warehouse opt-in mechanism, whereby LME warehouse operators will agree to create premium warrants."

They have also said that some other reforms have already been implemented including releasing new data on queues and future positions and even creation of a physical market committee. LME has already lost a court case against Rusal earlier this year and they say that they will hold off other reforms till the pending case in the UK Appeal Court reaches a verdict.