GENEVA United Co. Rusal wants the London Metal Exchange to extend its consultation into warehousing and postpone the introduction of its proposed rule changes.
Rusal wants to discuss with the LME a "better solution" to the proposed changes, first deputy chief executive officer Vladislav Soloviev said on the sidelines of AMM sister publication Metal Bulletins 28th International Aluminium Conference in Geneva.
The LME board is scheduled to vote on the proposed changes in October. The proposals, designed to reduce warehouse queues to 100 days and impose higher load-out rates for companies storing the most material, have already resulted in lower aluminum premiums.
"We support the proposal that Alcoa (Inc.) recently made to the LME," Soloviev told AMM. "I believe that consumers also share this view."
Pittsburgh-based Alcoa called for increased transparency via new data reporting, as well as LME regional premiums to allow consumers to hedge exposure to fluctuating premiums.
"The LME should be for price settlement, not a betting house. The number of transactions on the LME is around 30 times bigger than actual real demand. ... Prices have gone out of reality," Soloviev said. "We dont understand who holds long and short positions and we dont know who is the real owner of stocks. We can assume, but we dont know."
Rusal is asking LME owner Hong Kong Exchanges & Clearing Ltd. to be more transparent, helping consumers and producers alike. The proposed rule changes arent the solution, Soloviev said. "What problem do we want to solve? The availability of metal is not the issuedeliveries from warehouses in the past year were equivalent to just 9 percent of total consumption, excluding China," he said, noting that consumers can buy from producers if they cant get metal.
At the same time, cutting queues to 100 days will only push metal out of the exchange storage system, further reducing transparency.
"The proposals only create a new market for off-warrant metal," Soloviev said.