Rusal objects to HKEx’s ‘unprecedented intervention’ in aluminium market

Aluminium producer UC Rusal has called on the London Metal Exchange to postpone the changes it proposes to make to warehouse load-out rates, and instead provide more information about position holdings and encourage competition between warehouse firms.

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Aluminium producer UC Rusal has called on the London Metal Exchange to postpone the changes it proposes to make to warehouse load-out rates, and instead provide more information about position holdings and encourage competition between warehouse firms.

The measures the LME has proposed are intended to bring the queues for metal down to a maximum of 100 days in any location, by forcing warehouse firms to load material out at a higher rate than they bring it in, and are due to start in April.

Rusal said it is concerned that the measures proposed by Hong Kong Exchanges & Clearing, which owns the LME, “risk creating further aluminium market distortions rather than addressing features that have emerged since 2008”.

The LME itself has acknowledged that the proposal could lead to temporary distortions in the market.

“Simply put, the argument underlying the HKEx proposed rule change has not been clearly stated nor supported with exchange data,” Rusal ceo Oleg Deripaska said in the statement.

The HKEx’s intention “to accelerate the transfer into the market of an additional 2 million tonnes of aluminium, accumulated and stored since the financial crisis, is an unprecedented intervention and one that Rusal strongly objects to”.

Rusal argued that the measures will lead to a less transparent market place, and diminish the relevance of the exchange for industrial users.

The company outlined five alternatives that the LME should take, including increasing transparency about positions, boosting competition between warehouse firms and developing further aluminium contracts. 

Click here to read all five alternatives.

These went beyond the proposals made by Alcoa ahead of Metal Bulletin’s aluminium conference in Geneva last week, which Rusal supports.

Taking these measures would position the HKEx as “a force for change both within the LME and in base metals trading generally”, Rusal said.

Alex Harrison
aharrison@metalbulletin.com
Twitter: @alexharrison_mb

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