Alcoa says LME proposals create path to 'disruptive intervention'

The proposed changes to the London Metal Exchange warehouse agreement and physical delivery network give the LME excessive powers, boost the likelihood of litigation and put it at risk of becoming increasingly irrelevant to physical market participants, Alcoa said in a letter to the exchange.

The letter, sent on Friday by the US lightweight materials producer in response to a request for comment on the proposals by the LME and seen by Metal Bulletin, also criticised the proposed structure of the exchange’s aluminium regional premium contracts, and urged the LME to take further steps to improve transparency around the price discovery process. The US aluminium producer said in the letter that if the LME goes ahead with the proposed changes it will be “creating a path to increased disruptive intervention in physical markets, while continuing to focus on developing an exchange that caters to financial participants”. The LME’s two market-wide consultations ended on Monday. LME market participants were invited to respond to proposed enhancements to the LME warehouse agreement following an external legal review, including provisions to enhance the LME’s powers of investigation and enforcement with regard to warehouse companies in breach of the rules....


Andrea Hotter

February 10, 2015

20:00 GMT

New York