Aluminum consumers and some North American aluminum producers
applauded sweeping changes announced Nov. 7 by the London Metal
Inc. is encouraged by the development, chief supply chain
officer Nick Madden said in a e-mail to AMM.
"At first review, the
rule changes outlined by the LME appear to be a significant
step in the right direction, balancing the diverse input
received during the consultation process," he said. "I am
optimistic that these changes will help to address this
long-standing and complicated issue."
Tinto Alcan Inc. also welcomed the LMEs warehousing rule
changes. "We view this as an important step to address the
recent market and economic forces that have combined to create
a set of challenges in the warehousing aspects of the
LMEs activities," a company spokesman said via
International Inc. neither endorsed nor criticized the
LMEs announcement. "In terms of the LME specifically, all
industry participants will benefit from a warehousing system
that is driven by market-based supply and demand fundamentals,"
a company spokesman said in an e-mail.
But Aleris is still
reviewing the move, the spokesman said. "We dont yet know
the impact that these changes will have," he said.
Inc. commended the LME for taking action to boost transparency,
but also called for the exchange to provide a clear time frame
for its planned reforms (
amm.com, Nov. 7).
generally cheered the LMEs decision, reasoning that it
should reduce what they considered to be inflated regional
premiums and increase metals availability.
"In the long run, what
you want is to be able to get metal out in a reasonable time
frame. That just makes sense," one consumer said, although he
also expressed some concern about the impact of potentially
lower premiums and metals prices on producers. "They kept
putting metal in (warehouses) when they had excess capacity,
and now theyve created their own monster."
A billet producer said
his company expected the Midwest premium to drop and, in the
process, reduce the attractiveness of the North American market
to overseas billet producers. The Midwest premium plus billet
upcharge, which he pegged at roughly 22 cents, should tumble
even if the billet upcharge remains unchanged to a figure that
would make shipments to markets in Asia or South America more
attractive, he said. "Guys who are making deals with offshore
suppliers might want to look at developing relations
domestically," he said.
But a second billet
producer questioned why Midwest premiums might be impacted but
not other regional premiums such as European Union duty-paid or
spot Main Japanese Port (MJP). "If Midwest goes down, so does
E.U. duty-paid and MJP. I dont see how this impacts metal
flows," he said.
A second consumer said
it was still too early to say which direction premiums might
take, but questioned why there had been such a long lag between
the LME announcing that it had made its decision and making
that decision public. "The government may be slow to act, but I
dont think weve heard the last of this from a
regulatory standpoint," he said.
The LME is looking to
slash long lines for metals at exchange-listed warehouses and
has shortened the limit on the length of queues it will permit
at individual warehouse locations to 50 days, down from a
100-day limit proposed in July. Under the proposals, warehouse
companies with an outbound delivery backlog of more than 50
days in an individual location will have to deliver out more
than they load in, according to a scaled formula (
amm.com, Nov. 7).