HOTTER ON METALS: Aluminium losses yet to be realised

The physical aluminium trading world took a serious hit this year as premiums collapsed and a large number of participants suffered as a result.

Few predicted the roughly $300 per tonne decline in premiums since the start of the year, and fewer still escaped unscathed. A number of companies are yet to realise the losses in their trading accounts, a move that may reveal more clearly the depth of the pain being felt. The reason for the delay in reporting is that merchants use mark-to-market accounting methods for their physical inventory. This means they account for the so-called “fair value” of their metal or liability based on current market price rather than book value. There’s nothing illegal in this way of accounting, and all profits and losses have to be reported by the year-end under International Financial Reporting Standards. However, there is some leeway on when the actual physical premium profit or loss (P&L) is marked and realised, depending on when the mark-to-market valuation takes place for accounting purposes. How it works Traders use...


Andrea Hotter

October 09, 2015

10:48 GMT

New York