ALUMINIUM: The consumer view on long-term hedging

General Motors (GM) was one of the first aluminium consumers to put a major, long-term hedge on the London Metal Exchange.

Here, a former senior manager and chairman of GM's global strategic hedging team, Kevin Moore, gives Metal Bulletin the consumer’s view of the LME aluminium contract.
“GM was among the first big hedging consumers and became active in the early 1990s, driven by the significant financial impact resulting from the 1988 LME price spike,” Moore said.
“Can makers did not [hedge] as they could fix product prices for a year or more with the can-sheet producers.”
For carmakers such as GM, primary aluminium represented a very small part of the raw material costs. About 80% of the company’s aluminium needs in the early 1990s were accounted for by secondary aluminium, with primary metal used mostly for heating coils and air-conditioning systems.

The LME held two advantages for consumers such as GM. First, the London exchange provided a transparent alternative to the Alcoa/Alcan producer pricing model. Second, it presented...

Published

Jethro Wookey

May 19, 2015

15:22 GMT

London