SPOTLIGHT: Alcoa letter to LME – sensible solution or defensive measure?

Alcoa’s open letter to the London Metal Exchange on the state of the aluminium market has met with mixed responses, with some participants backing the call for regional premium contracts and others seeing only a producer protecting its interests in the current system.

Tim Reyes, Alcoa’s president of materials management, stated in the letter that the growing spread between the LME price and premiums is the real problem, and urged the exchange to use its forum, platform and technology to offer regional premium contracts to enable users to hedge the premium component of the aluminium price more effectively.

Tim Reyes, Alcoa’s president of materials management
“It’s very interesting – Alcoa has got to the fundamental problem that it is not the LME warehousing rules or the granularity of the load-out rates, but that the LME has moved away from underpinning the physical market,” an analyst said.

The analyst added that while there are over-the-counter products available for hedging the premiums, they are not very...


Jethro Wookey

September 16, 2013

15:13 GMT