Russal copnsiders Aluminum financing deals to be still profitable

Financing deals tying up aluminum inventories are still profitable as interest rates remain at historical lows, a status quo that is likely to last for some time, a senior executive at United Co. Rusal said Thursday.

"The current positive forward curve, low interest rates and growing premiums create a strong return well above U.S. (Treasury bonds) and other fixed-income assets," Steve Hodgson, director of international sales for the Moscow-based producer, said at AMM sister publication Metal Bulletin’s 27th Aluminium Conference in Moscow.

Hodgson noted that a large portion of the material officially held in London Metal Exchange warehouses is in the queue for delivery.

"Canceled warrants have been a key feature of the market since early 2012, representing 38 percent of total stocks," he said. "Nevertheless, shipments ex-warehouses are at historical highs on new load-out rules."

In the past, consumers have complained that long queues were causing delays in getting access to metal, particularly in Detroit.

"Aluminum financial deals continue to be a significant part of investments into aluminum, irrespective of warehouse dynamics," Hodgson said.

Large quantities of aluminum are already being stored in warehouses across the globe, pushing LME stocks to record highs of nearly 5 million tonnes.

Producers and traders estimate that probably as much supply is again sitting off-warrant in warehouses and ports, tied up in financing deals aimed at locking the metal away while consumption remains slack.

Rusal has had some of the highest-profile financing deals, although the company has declined to specify how much material it had tied up.