The London Metal Exchange, the main global metals market, suffered a big setback on Thursday in attempts to reform its warehousing network when a court ruled in favour of objections by Russian firm Rusal. The dispute hinges on plentiful supply of aluminium, and on low interest rates which encourage the stockpiling of metals. The decision by the High Court means that the new warehousing arrangements, a top reform for the LME, will be delayed beyond the intended launch date of April 1. Rusal, a leading group in the aluminium industry, had complained to the court that consultations about the new arrangements had been carried out in an unjust and illegal way. The LME had intended that the reform would oblige warehouses in its network to deliver more metal each day than they receive. Currently, a lapse of 50 days occurs before metal due for delivery can be collected. The purpose of the change was to counter big increases in charges for transportation, insurance and warehousing which consumers have to pay to take possession of their metal. Aluminium is the metal most affected by these delivery problems. Several companies which use aluminium had complained about difficulties in receiving physical metal from the LME and the increase in charges, which amount to up to 15 percent of the LME price. A spokeswoman for the LME said that the organisation continued to hold that the complaint by Rusal was unjustified overall, and was considering either appealing or beginning a new round of consultations. The president of Rusal, Oleg Deripaska, said his company welcomed the ruling and was keen to work closely with the LME and other concerned parties on the consultations and changes to the rules so as to improve the transparency of the market. Big producers of aluminium, including Rusal and US group Alcoa, had raised strong opposition to the LME's proposed reform. They would suffer from a lowering of charges since these help their cash situation given that the price of aluminium on the LME has fallen by more than half since 2008. - Low interest rates - The price has fallen because supplies are plentiful, even though users have difficulty in taking delivery of supplies. However, this is because since the financial crisis the stockpiling of aluminium has become a highly profitable activity owing to technical and financial factors, including exceptionally low interest rates. This has led to a rise of inventories and long delays for the release of metal from warehouses, and increasingly high charges. Some analysts were sceptical about the effect of the LME reform on the charges. Analysts at Commerzbank argued that an increase in base interest rates by the US Federal Reserve central bank would have a far bigger effect by reducing the financial return from the warehousing of metals. They also argued that producers of aluminium may have to reduce their capacity so as to reduce supplies and push up prices. In February, Rusal said that it would reduce its production by 3.5 million tonnes this year as part of a sharp reduction of its capacity.
GMT 11:02 2018 Tuesday ,11 December
ASE opens trading on lower noteGMT 15:40 2018 Monday ,10 December
Amman stock market closes trading at JD4.4 millionGMT 19:10 2018 Wednesday ,05 December
Index at Palestine stock market drops by less than one pointGMT 17:58 2018 Sunday ,25 November
Amman stock market wraps up trading at JD2.6 millionGMT 14:24 2018 Thursday ,22 November
Russia’s stock market demonstrates record-breaking figures in 2018GMT 11:45 2018 Tuesday ,20 November
Tokyo stocks close lower as tech issues weigh, Nissan tumblesGMT 15:08 2018 Monday ,19 November
Amman stock market wraps up trading at JD6.1 millionGMT 15:51 2018 Sunday ,18 November
U.S. stocks post weekly losses amid tech shares routMaintained and developed by Arabs Today Group SAL.
All rights reserved to Arab Today Media Group 2021 ©
Maintained and developed by Arabs Today Group SAL.
All rights reserved to Arab Today Media Group 2021 ©
Send your comments
Your comment as a visitor