COMMENT: Ten things we learned at the aluminium conference in Geneva

Metal Bulletin’s journalists’ key discoveries at the 28th International Aluminium Conference in Geneva in the week commencing September 16.

Metal Bulletin’s journalists’ key discoveries at the 28th International Aluminium Conference in Geneva in the week commencing September 16.

  • The lawsuits bombarding LME warehousing are not a summer storm. Another suit was filed in the USA against Goldman Sachs and the LME as the conference went on. The defendants have said they will vigorously defend themselves. The high cost of initially bringing the suits coupled with the otherwise limited downside of losing means the plaintiffs are unlikely to step back either, commodities lawyer John Whittaker said.
  • And neither is the contention about the rules. One warehousing source said it was possible that warehouse firms hit by the new rules could themselves consider suing. “If you set up rules that reach into my profit and loss and affect how I must operate, then, of course, going to court is a possibility.” (A trading source played down the likelihood of such suits though. “The warehouses serve the commodity markets, so I think it unlikely they would go that far,” he said.)
  • As JP Morgan looks to offload its commodity business, other banks are waiting in the wings: CBA and BTG Pactual.
  • There is a gap between the industry’s perception of itself and what consumers and legislators think of it. The industry thinks that aluminium is the material of the future, because it is lightweight and recyclable. But, for example, aerospace companies are starting to favour other materials over the light metal. Constellium vp marketing Fabienne Letadic said new aircraft are more than 50% composite material, where in the past they would have been about 70% aluminium.
  • The Indonesian government is set to make some concessions to its raw material export ban, but it is still preparing to enact the legislation next year, as scheduled, according to Inalum’s business director, Sahala Sijabat.
  • Most consumers are not buying the argument that the total cost of aluminium is lower now than it has been for years. The high premium, and the difficulties they face in hedging it, is hurting these companies, they said time and time again.
  • Contract negotiations between aluminium sellers and buyers in Europe are likely to roll on into LME Week and perhaps beyond. Last year’s negotiations showed that consumers still want regular supply contracts, but they will wait until December to sign them if they have to.
  • Growth targets are being maintained. Executives from Rusal and Hydro reaffirmed they expect a 70 million-tonne aluminium market in 2020. Novelis’s Erwin Mayr, president of Novelis Europe, confirmed it was on track to produce 80% of its output from recycled aluminium by the same year.
  • Forward premiums have fallen, rapidly. While aluminium prices remain in a healthy contango on the London Metal Exchange, with December prices about $45 per tonne higher than cash prices, the aluminium premiums curve shows the opposite trend. A trader said that 2014 deals are being struck with premiums down about $50 per tonne on current levels or 2 cents per lb lower in the US market. If prices and premiums both follow their curves it will support the theory that the cost of buying aluminium is at the natural market level – if premiums fall, prices will rise to keep the cost buying at similar levels.
  • Dubai Aluminium (Dubal) is a very highly regarded operation. The panel of experts that decided upon the winners of Metal Bulletin’s inaugural awards for excellence in aluminium named the Middle Eastern smelter the winner in three separate categories – smelter/mill of the year, most environmentally responsible company, and smelting company of the year. Its vp of smelter operations, Dr Ali Al Zarouni, picked up the rising star of the year award. Dubal has impressed the judges across its operations, while improving its green credentials and operating its own reduction cell technology for the production of high-quality aluminium.

    Alex Harrison
    Twitter: @alexharrison_mb

    Jethro Wookey
    Twitter: @jethrowookey_mb

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