NEW YORK The North
American Die Casting Association (Nadca), along with
representatives from several large die casting firms, met with
officials from the London Metal Exchanges aluminum
committee May 22 to discuss the effectiveness of the North
American special aluminum alloy contract (Nasaac), Nadca
president Daniel L. Twarog told AMM.
The LME did not return calls for
comment, but according to Twarog, the meetingwhich took
place via teleconferencegave die casters an opportunity
to raise their numerous concerns with the contract and, in some
cases, suggest solutions.
"Overall, (LME) representatives
were extremely open to the points made by Nadca and its
members," Twarog said. "They said they would not be able to
offer specific remedies from the conference call but would work
with the appropriate committees of the LME to find
Additionally, Twarog said the
LME offered the die casting industry a potential seat on the
"We asked that the invitation be
provided in writing and consideration would be given," he
The meeting came less than a
month after Nadca said in an April letter that it would
"encourage all die casters to discontinue support of the Nasaac
for pricing finished aluminum parts within the industry" unless
changes to the contract were made immediately (
amm.com, April 30).
Nadca opened the meeting by
highlighting a series of issues the die casting industry said
it is experiencing regarding the Nasaac contract, Twarog told
AMM immediately following the meeting.
Specifically, Nadca indicated
that the spreads between the Nasaac price and the physical
aluminum alloy marketwhich Twarog said have been
relatively predictable from 2003 to late 2011have
recently swelled to more than 25 cents per pound, causing die
casters to incur serious financial setbacks on Nasaac-based
contracts held with major automotive companies, Twarog
"The LME responded to this
complaint by saying that the LMEs primary role is to
discover a reference point between buyer and seller," Twarog
told AMM. "They commented that the recycled business
is unique to aluminum because most metals do not have active
Nadca had also alleged in its
April letter that "the market is perceived as being manipulated
by the trading, financial and warehouse industries given
financial ownership of LME warehouse facilities."
In response, Twarog said the
committee members "indicated that they were aware that
financial institutions are new to the game and are creating
competition and a significant delivery backlog."
In response to the LMEs
reported comments, one Nadca member asked if the premiums for
the metal, which are paid over the LME price, could be
published by the exchange on a regular basis, Twarog said.
"They indicated that premium
levels were not published (by the exchange) because the levels
were negotiated between buyer and seller," Twarog said, adding
that members of the aluminum committee reportedly reminded the
die casters that the Nasaac price is the in-warehouse price and
not the delivered or negotiated price paid for metal.
The LME suggested that expanding
the scope of the contract may help the current situation,
The Nasaac contract currently
accepts aluminum alloy conforming to the LMEs A380.1
specification, which is a modification of the Aluminum
Associations A380.1 specification.
"One of our members suggested
that 319 (aluminum alloy) would be the next logical alloy
because of its pervasive use," Twarog said. "However, he
cautioned that the specific composition be considered because
automotive companies have different specification levels of
certain elements in the 319 alloy. He also suggested 356
(aluminum alloy) would be the next alloy to consider."
Nadca members also reportedly
requested that the LME immediately stop allowing members to
re-warrant material, which has led to material being shipped
from warehouse to warehouse by LME members.
"This would prevent financial
institutions and others from moving metal from one warehouse to
the other," Twarog said.
"We also suggested that the LME
include a provision that the metal is sold and shipped out of
the warehouse within a specific time period. This, we hope,
would prevent quality issues with the material," he added.
The LME reportedly indicated
that it would evaluate the issue but indicated there could be
unintended consequences of preventing re-warranting, including
the potential elimination of active trading in the contract,
A follow-up call with the LME
will be scheduled after the next aluminum committee meeting on
June 11, Twarog said.
Aluminum committee chairman Gavin Prentice (formerly of
Marex Spectron) was in attendance at the meeting as well as the
LMEs company secretary Marcos Castro, chief operating
officer Diarmuid OHegarty and head of business
development Chris Evans, according to Twarog.