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LME, die casters discuss Nasaac concerns

Keywords: Tags  LME, Nadca, LME, Nasaac, Daniel Twarog, Nathan Laliberte, aluminum


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 Exchange’s 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 meeting—which took place via teleconference—gave 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 solutions."

Additionally, Twarog said the LME offered the die casting industry a potential seat on the aluminum committee.

"We asked that the invitation be provided in writing and consideration would be given," he said.

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 market—which Twarog said have been relatively predictable from 2003 to late 2011—have 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 said.

"The LME responded to this complaint by saying that the LME’s 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 secondary markets."

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 LME’s 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, Twarog said.

The Nasaac contract currently accepts aluminum alloy conforming to the LME’s A380.1 specification, which is a modification of the Aluminum Association’s 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, said Twarog.

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 LME’s company secretary Marcos Castro, chief operating officer Diarmuid O’Hegarty and head of business development Chris Evans, according to Twarog.


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