NEW YORK Aluminum consumers should buy directly from producers and stop complaining about long queues at warehouses and the high cost of buying physical metal, according to Alcoa chief executive officer Klaus Kleinfeld.
Consumers made the "dangerous assumption" that aluminum prices were going to fall, and this set them up for difficulties if they delayed purchasing metal, he told AMM.
"What we believe were seeing is that many consumers reduced their amount of buying in the market because they assume the metal price is going to be lower, or even lower going forward. And then when it isnt that way, were hearing people complaining about the queues and the warehouses, or high regional premiums," Kleinfeld said.
Consumers seeking metal could "come to Alcoa and cut a long-term deal with us," he added. "You dont need a warehouse in between and wed be happy to deliver the metal to your doorstep. Were open for business on that. Consumers dont need to wait in a queue."
Like many aluminum companies around the world, North American producers like Pittsburgh-based Alcoa and Rio Tinto Alcan, Montreal, found themselves in the unfortunate position of having excess material with no consumer outlet for the product.
This is despite exercising producer discipline and taking the tough decision to cut output across their higher-cost operations.
Financing dealsaimed at locking away metal while demand was slackthen became viable due to low interest rates and higher aluminum futures prices vs. cash prices, or a contango.
Queues to access material grew as aluminum flowed into warehouses, with hot spots for delays including Metro International Trade Services LLCs Detroit sheds and Pacorini Metals facilities in Vlissingen, the Netherlands.
Consumers arent the ones in the queues to get metal anyway, Kleinfeld said.
"Where were consumers at the time when they could have bought metal cheaply? Theyre not in the queues either. Where are they today? How many of those consumers are really out there and hedging their future metal?" he asked.