Rusal battles with LME on aluminium price

Rusal, the world’s largest aluminium producer, has reignited its war of words with the London Metal Exchange, saying the LME has allowed financial speculators to distort prices.

Vladislav Soloviev, chief executive of the heavily indebted Russian group, said the price of aluminium traded on the LME has been depressed by as much as 30 per cent by the actions of “money-market players”.

“The LME price does not reflect the real supply and demand balance,” said Mr Soloviev, as he called on the exchange to increase transparency and provide further detail on market activity.

Rusal, controlled by billionaire businessman Oleg Deripaska, produces 7 per cent of the world’s aluminium, a lightweight metal that is used in everything from soft drink cans to car bodies.

The Moscow-based company successfully restructured its $10bn debt pile last year and now wants to become the world’s most profitable aluminium producer by focusing on higher margin products for the automotive and construction industries. However, it faces headwinds from softening aluminium prices.

It has also been involved in a bitter legal wrangle with the LME over plans to reform the exchange’s warehousing system and introduce new rules to tackle long queues that built up in the aftermath of the financial crisis.

Mr Soloviev, who took up the position of chief executive in November, said the LME should not focus on load out rates from the warehouses but on increasing transparency around trading so participants could see the positions held by funds and other financial players.

“The LME needs to start with transparency,” he said. “And then restrictions.”

The LME said it was “surprised” by Mr Soloviev’s comments , saying it had published Commitments of Traders reports since August 2014.

“We have endeavoured to produce a report that will reflect as accurately as possible the business activity of users within the current market format,” the LME said.

“Market users are fully aware that financial users of the exchange are a vital part of core liquidity, which supports the physical industry in managing price movement. We do not believe that financial users of the exchange impact our daily published prices,” the LME added.

Mr Soloviev is not the first senior Russian business figure to attack the role of speculators in London and New York for distorting commodity prices. In February, Igor Sechin, a close ally of President Vladimir Putin and chief executive of Rosneft, the state-backed Russian oil company, rounded on financial speculators, blaming them for the 50 per cent drop in crude oil prices.

Mr Soloviev forecast the all-in aluminium price — the LME cash price plus a premium for immediate delivery — would not fall below $2,000 a tonne, arguing this was the level that would accelerate further shutdowns in the industry.

Mr Soloviev said he believed it would be possible to bring Rusal’s debt down to a “normal” level within the year as long as aluminium prices remained supported.