Aluminum industry wary of LME rules, probes

Jul 22, 2013 | 07:29 PM | Michael Cowden

Tags  CFTC, Commodity Futures Trading Commission, Federal Reserve, Senate subcommittee, banking committee, Sherrod Brown, Saule Omarova, Davenport & Co. Llloyd O'Carroll

CHICAGO — Some aluminum producers and traders are urging caution as Federal authorities examine the role of financial institutions in physical commodity trading and the London Metal Exchange proposes rule changes on load-out rates.

"Aluminum prices are about 40 percent below pre-crisis levels and over half of the producers are losing money or are marginally profitable. Any rule changes must result in fair pricing and be phased in gradually over time so as to minimize disruptions to what is already a very volatile market," a spokeswoman for Pittsburgh-based Alcoa Inc. said via e-mail July 22.

The LME’s cash aluminum contract closed the official session July 22 at $1,794.50 per tonne (81.4 cents per pound), down 15.5 percent from a 2013 high of $2,123 per tonne (96.3 cents per pound) recorded Feb. 15.

Some market sources have argued that high premiums, resulting from metal being tied up in warehousing queues, have made the difference between profits and losses at aluminum producers (amm.com, July 11).

Such reactions come amid a July 23 Senate committee hearing on the intersection of banking and commodity trading, as well as a reported U.S. Commodity Futures Trading Commission (CFTC) investigation on the issue (amm.com, July 22), a review by the Federal Reserve of rules governing banks and their physical commodity businesses, and proposed new rules by the LME aimed at limiting long waits for metals at some of its warehouse locations (amm.com, July 1).....





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