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Warehouse queues caused by market forces – Alcoa exec

January 28, 2013 - 11:40 GMT Location: New York

KEYWORDS: Warehouse , Alcoa , aluminium , premiums , LME

Free market forces have combined to create the debate about London Metal Exchange warehousing, but that does not necessarily mean there is a problem, a senior Alcoa executive has said.

"To have a solution [for the warehousing queues], there needs to be a problem, and I don’t think this is actually a problem," Tim Reyes, head of materials management at the US producer, told Metal Bulletin in an interview. "We’ve got a series of free market forces at work that have led us to where we are," he said. These forces stem from the downturn of 2008, which caused a slump in demand for aluminium in key consuming markets and led to metal flowing into warehouses as low interest rates and a contango market structure encouraged financing deals. Lengthy queues to get material out of warehouses have arisen in locations including Detroit, New Orleans and Vlissingen, leading to a huge industry debate over who is to blame and what can be done about it. A significant portion of metal is sitting off warrant and not in warehouses approved for storage by...

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