CHICAGO Some aluminum billet market participants have
predicted that the proposed new London Metal Exchange warehouse
load-out rules could see billet production ramp up.
The proposed rules, aimed at trimming long queues for metal at
LME-registered warehouses (
amm.com, July 1
) would make warehouse deals for
P1020 ingot less attractive leading producers to mull whether
they should realign output towards more billet than P1020,
billet market sources said.
It is being discussed. (Producers) are considering moving
some P1020 production to billet, a consumer source told
Midwest P1020 premiums have become a reflection of warehouse
dynamics since banks and trading houses became involved in
their ownership, one billet producer source said. Midwest
(premiums) used to be based on freight, and now it has almost
absolutely nothing to do with it, he said.
The U.S. Senate plans to hold a hearing July 23 about whether
banks such as JPMorgan Chase & Co. and Goldman Sachs Group
Inc. should be allowed to control warehouses as concerns
amm.com, July 17
) Banks and trading companies
havealso been ordered by the U.S. Commodity Futures Trading
Commission (CFTC) to preserve documents ahead of a possible
investigation into warehousing activities, sources said (
amm.com, July 22
JPMorgan acquired Henry Bath in February 2010 as part of its
purchase of RBS Sempras metals trading business, the same
month Goldman bought Metro International Trade Services LLC.
amm.com, Feb.19, 2010
). Trafigura Ltd. acquired
Nems in March and Glencore International Plc followed in August
with its purchase of Pacorini Metals BV.
Meanwhile aluminum billet premiums eased slightly last week
amid scattered reports of motivated sellers offering material
at discounted prices.
AMM has adjusted its billet premium to a range of 11 to 12.75
cents from 11 to 13 cents previously.
Both producers and consumers generally agreed that business in
2013, while fair, has not been as strong as expected in 2012
and that forecast short supplies in the billet market, used by
sellers to flog higher premiums during contract negotiations
last year, has not materialized.
(Producers) said it would be tight, tight, tight when, in
fact, its been just the opposite. Its a joke.
Theyre not only wrong, theyve lost
credibility, said a second billet consumer, echoing the
sentiment of others.
A third consumer agreed, predicting that billet contract
premiums for 2014 would be lower than those in 2013. The
driver behind last year (2012 negotiations for 2013 metal) was
people being fearful of not getting enough billet ... and
thats not the case going into 2014 (negotiations),
he said, pointing in particular to producers playing up
potential shortages resulting from a labor disruption at Alcoa
Inc.s majority-owned Aluminerie de Bécancour Inc.
that never happened (
amm.com, Feb. 22
A potential impact of lower billet premiums in North America
might be a drop in imports, the producer source said. If
the premium is high, it attracts more imports. And if it were
to drop, the opposite would happen and billet could become
tight, he said, contending that spot availability remains
limited at domestic suppliers and prompt metal expensive.
But the second consumer brushed aside any notion of lower
billet premiums reducing offshore supplies, ticking off
projects expected to boost capacity in the Middle East and
Chinese capacity relocating to western provinces but not
If North American premiums were to nosedive, offshore material
might be offered first to Europe and Australia, he said.
But there is just so much capacity coming on that ... it
will eventually be here, too, he said.