NEW YORK Lead market participants say that the majority
of signed 2013 contracts have used the traditional
LME-plus model rather than the
cost-plus model favored by producers, although at
least one producer was reported to have signed several deals
using the cost-plus model.
One broker said that most London Metal Exchange-based contracts
utilized a premium of about 14 cents per pound, adding that one
large domestic producer managed to impose their
will and obtain business using the cost-plus model, which
incorporates their production and scrap acquisition
Several brokers and producers told AMM that the LME-plus model
was still dominant in 2013 contracts, but discussions were
still ongoing with many parties.
A lot of people are going month by month. I dont
think a lot of the big contracts signed in previous years have
been signed this year, a second broker said.
Contracts for 2013 have been the subject of a stand-off between
lead producers and consumers since October, with customers
reported to be hesitant to accept producers proposed new
cost-plus pricing model (
amm.com, Oct. 29
In the end, a lot of the large companies said, We
cant hedge junk-plus because we dont know what
youre paying for junks out there, the first
broker said. If everybody did it, thered be no
incentive to be competitive anymore. They could just go out and
pay $1 per pound for junks and pass the cost along to the
Meanwhile, spot primary lead premiums were unchanged in a range
of 13 to 15 cents per pound on Friday.
The LMEs three-month primary lead price closed the
official session Friday at $2,355 per tonne ($1.07 per pound).