China should use more aluminum and recycled copper, industry says
China depends on overseas imports for 60% of its aluminum resources as opposed to 70% of its copper resources.
Pressure in the aluminum market continues to build, as contracts for October delivery on the London Metal Exchange trade at an even higher premium over November in a sign of a mounting squeeze.
The metals world, which is gathering this week in London for its annual LME Week jamboree, has been gripped by a standoff in the aluminum market that is promising to come to a head over the next two weeks.
Traders caught in a lengthy queue to withdraw aluminum from the LME’s system are under pressure because they need to roll over hedging positions while they wait, while warehouse owner Istim Metals LLC has controversially increased a key administrative fee that makes it much more costly for the traders to re-register the metal on the LME if prices turn against them.
Meanwhile, the market is increasingly focused on a large long position in October contracts held by Trafigura Group — the same trader that originally deposited the mountain of aluminum in Istim’s warehouses.
The October monthly contract traded at a $22 premium to November on Tuesday, hitting a new high after the spread jumped by more than $9 the previous day.
Bloomberg reported on the weekend that the LME has received complaints from traders who say the tightness in the October-November spread is being exacerbated by Istim’s fee hike, while at least one party has complained to the UK’s financial regulator.
The warehouse company initially raised the fee to reregister metal to $50 a ton. It subsequently reduced the charge to $27.50, but it remains well above the industry norm of $5 to $10.
Istim and Trafigura have previously declined to comment.
(By Liezel Hill)
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