Aluminum consumers are buying metal on a short-term basis rather than for later delivery, according to Sucden Financial Ltd., one of the 12 companies on the floor of the London Metal Exchange.
“There is little sign of forward bookings,” said Steve Hardcastle, head of client services for industrial commodities at Sucden. “The negotiations for next year’s contracts are being particularly difficult this year on the basis of premiums.”
Short-term buying “is going through at good volumes,” Hardcastle said at a briefing in London today. High premiums that buyers have to pay for aluminum are playing “a huge part” in the aluminum market, eroding consumer margins, he said.
The fee added to aluminum for immediate-delivery on the LME was $170 to $185 a ton in Singapore, excluding duty, Hardcastle said. Premiums in Rotterdam that include duty into the European Union were last seen at $280 and $290 a ton, he said.
Aluminum consumers are buying nearby metal on the LME and selling forward to take advantage of the market in a so-called contango, when contracts with later delivery dates trade at higher prices than nearer-dated metal. They are also hedging interest rates and currencies to “claw back their margins,” Hardcastle said.
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