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European aluminum buyers set to book short term deals

Keywords: Tags  aluminum premiums, aluminum contracts, LME, London Metal Exchange, Jethro Wookey

LONDON — European aluminum consumers will sign short-term deals for the first quarter of 2014 if the London Metal Exchange’s forthcoming announcement on its new warehousing rules is delayed as they continue to wait to book 2014 business.

Market sources expect the LME to broadly confirm the new rules, although there could be some amendments. Aluminum premiums are expected to fall in the wake of the announcement, with more metal being made available to the market as some warehouses reduce intake.

Consumers want to wait for those falls before committing to 2014 business.

"We’re still waiting for an announcement. (If it does not come soon) we will do business on a formula basis for just the first quarter, so it will not hurt too much," one consumer said. "We cannot wait until mid-December."

An announcement was expected to quickly follow the LME’s decision over the warehousing rules Oct. 25, but the regulatory approval process could delay that for several weeks, market sources warned.

"The LME might have to wait weeks for regulatory approval," one producer said. "The board meeting was on Friday and now the decision goes to the regulators, and then they come back with their views."

While Dec. 1 could be considered a soft deadline, when warehouses set rates for the coming year, the LME could push that back if necessary.

"It’s a deadline unless the LME moves it," the producer said.

Spot activity is quiet and there are no longer people selling low to secure business in Europe. Premiums firmed in the week ending Oct. 11 after falling in the third quarter. Duty-paid premiums reached $235 to $255 per tonne vs. $230 to $250 previously, and duty-unpaid premiums rising to $175 to $200 per tonne from $170 to $197.

"Everyone is sitting on the fence; consumers don’t want to budge," the producer said. "It could lead to more spot and quarterly business."

A version of this article was first published in AMM sister publication Metal Bulletin.

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