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LME decision disappoints market as metal prices drop

Date: Mon, 18 Jul 2011 | Author: Paul Sanderson

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The LME has decided to increase the minimum amount of aluminium released from warehouses from April 2012.

Aluminium markets were affected by a minimum of 1,500 tonnes per day being released by LME warehouses, but this minimum will be increased to 3,000 tonnes per day from April next year.

Consumers of aluminium such as can makers and car manufacturers believe that this minimum level was allowing owners of the warehouses to artificially keep prices high by restricting the amount of material onto the market. By releasing only the minimum amount of aluminium each day, it also meant that consumers of the metal could wait up to six months before receiving delivery.

In particular, the Detroit warehouse in the US, owned by Goldman Sachs, has been the focus of discontent, with 200,000 tonnes of aluminium awaiting delivery.

However, this doubling in the daily minimum for aluminium has not been received well by the aluminium consumer market.

Novelis chief procurement officer Nick Madden told the Financial Times that he was “disappointed” that the LME had made only a minor adjustment to the problem.

He added: “We believe a higher [load-out] rate is necessary. We are also concerned that this change will not take effect until April 2012. This unnecessary delay will prolong anomalous pricing and supply chain issues for both manufacturers and consumers in the market.”

Meanwhile, most metals dropped in price on Friday on the LME as the market took in a week of mixed economic news. For UK buyers, a stronger dollar against the pound added to the falls.

After a settlement price on Thursday of $2,505 (£1,553) on Thursday, aluminium dropped even more to $2,483 (£1,539) for 3-month delivery.

Copper closed at $9,626 down slightly from Thursday’s price of $9,670. But a stronger dollar meant that in sterling terms, the metal dropped from £5,997 to £5,969.

Lead closed at $2,663 (£1,651) on Friday after posting $2,697 (£1,672) on Thursday. Nickel was at $24,050 (£14,913) on Friday up from the $23,865 (£14,865) seen on Thursday.

Tin was at $27,300 (£16,929) on Friday compared to $27,490 (£17,049) on Thursday. Zinc saw a price of $2,374 (£1,472) on Thursday and dropped slightly on Friday to $2,346 (£1,472).

3-month steel closed at $575 (£357) down only a drop from Thursday’s $580 (£359).

 

 

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