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Metal Bulletin launches ali arbitrage indicator

Dec 06, 2017 | 11:42 AM |

Tags  aluminium, arbitrage, LME, New Orleans, Owensboro, Johor, Port Klang, Busan Singapore

LONDON — Metal Bulletin launched its new Aluminium Arbitrage Indicator Tool on Wednesday December 6.

Aluminium arbitrage Dec 6

Market commentary:
Profits made by cancelling aluminium from London Metal Exchange warehouses in Asia and shipping it to the US Midwest increased this month, according to the Metal Bulletin Arbitrage Indicator, with freight rates for the route easing in November.

The freight and fot component - the total value of cancelling material from the warehouse and shipping to Owensboro, Kentucky, in the US Midwest - of trades decreased to $135.86 per tonne from Singapore, $126.56 per tonne from Busan, South Korea, and $120.58 per tonne from Port Klang and Johor, Malaysia.

These are down from $138.83, $128.02 and $122.74 per tonne respectively in October.

The decrease to the freight and fot component follows an easing in the freight rates from warehouses in Asia to New Orleans.

“Ocean freight rates have eased by around $3 per tonne... the shipping market is coming off in the Far East as rates on ships are down while the US grain market has yet to take off,” one market source said.

“Owners are hoping for a December 1-20 late push but [are] hearing in the market that most soy beans have already shipped to the East.” the same source said.

“Owners will not be very keen for a December loader for February arrival. It is more likely that they will give a larger discount for a January loader [since] typically the period rates on ships go down as the Chinese New Year gets closer,” the same market source added.

Barge freight costs from New Orleans to Owensboro were largely stable, similar to how they have been for much of the past six months.

The decrease to freight costs means the potential profit made by cancelling aluminium from LME sheds has increased.

For material originating from warehouses in Singapore, profits rose to $73.57 in November for shipments of 10,000 tonnes (via break bulk), up from $70.60 previously.

In Busan, the estimated arbitrage moved up to $82.87 per tonne from $81.41 per tonne in October, also for 10,000-tonne shipments.

In Johor and Port Klang, profits moved up to $88.85 per tonne from $86.69 previously.

Ian Walker


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