Save
Print[Ferro-Alloys.com] A battle between warehouses for aluminum that has propelled costs to secure metal to record highs, despite a glut, is raising tensions between producers and consumers in annual supply contract negotiations that started this week.
Spot market premiums have soared as vast amounts of aluminum are stuck in warehouses owned by big banks and trading houses, with millions of tonnes locked away in financing deals and millions more clogging up a system that causes months-long delays to get metal out.
In an unprecedented move, Russia's RUSAL, the world's largest producer of primary aluminum, has suggested it could offer floating premiums in the term supply contracts it negotiates with consumers for 2013, with both sides reluctant to set long-term deals as spot market premiums reach record highs.
The usual practice of agreeing on a fixed premium - money paid over the benchmark London Metal Exchange (LME) cash price to secure physical metal - forms a part of annual contract negotiations between producers and consumers.
"Consumers don't want to lock in high premiums and will be interested in shortening the term of the contracts," said Edgardo Gelsomino, senior aluminum analyst at Wood MacKenzie.
While LME prices languish around three-year lows, aluminum buyers are paying record premiums for physical delivery on top of the base price. Almost 5 million tonnes of aluminum has been pulled into LME-bonded warehouses over the past five years, much of it locked in for years at a time.
The market is expected to remain in surplus for at least another year; the contango underlying financing deals will remain in place and support premiums.
Copyright © 2013 Ferro-Alloys.Com. All Rights Reserved. Without permission, any unit and individual shall not copy or reprint!
- [Editor:editor]
Daily News
Research
Magazine
Company Database
Customized Database
Conferences
Advertisement
Trade
Online inquiry
Contact
Tell Us What You Think