The London Metal Exchange hasn’t done enough to reduce the time it takes to withdraw aluminum from warehouses, said William Hovis, who helps oversee Coca-Cola Co.’s purchases of the metal.
Hovis, chief procurement officer at the company’s bottling investment group, echoed concerns from other aluminum buyers such as MillerCoors LLC after lengthy wait times at LME storage facilities led to inflated rent charges. The surcharge added to the price of metal for immediate delivery on the LME, known as the premium, is a “significant cost” for the world’s biggest beverage company, according to Hovis. Coca-Cola supports the LME’s proposal to limit rents at some warehouses, he said.
“The LME has taken good steps forward, yet we don’t think they’ve gone far enough,” he said at the CRU World Aluminium Conference in Dubai on Wednesday. “We are hopeful that progress will continue.”
The LME, the world’s biggest metals bourse, has taken measures in the past year to reduce delivery times for aluminum and crack down on potential market abuse at its network of about 650 warehouses. While the queues have fallen, it still takes more than 400 days to retrieve metal from Detroit and the Dutch port of Vlissingen, the biggest aluminum repositories, according to data from the exchange.
“The LME has a duty to ensure the integrity of its reference prices and the operation of a fair and liquid market for all industry participants,” Miriam Heywood, a spokeswoman for the bourse in London, said in an e-mailed statement.
The exchange now requires warehouse companies with waits exceeding 50 days to remove more metal than they take in. In August, it will speed up the pace of removals and has already taken steps to limit warehouses from hoarding metals.
The measures have been successful, Michael Widmer, a London-based analyst at Bank of America Corp., said in a report dated May 8. Globally, premiums for aluminum have tumbled this year after record exports from China overwhelmed demand, according to Harbor Aluminum Intelligence, an Austin, Texas-based researcher.
Now being considered by the LME is its power to limit storage charges at warehouses where there are waits for metal. The LME is reviewing comments on the proposal and will act “in due course,” Oscar Wehtje, head of product development at the LME, said in Dubai on Wednesday.
“To ensure equitable growth across the industry, Coca-Cola and the aluminum users group support the LME’s rent capping proposal that is currently undergoing consultation,” Hovis said in a statement in response to a question from Bloomberg. “We believe this would be most effective if introduced in conjunction with a similar ‘load-out charge’ capping scheme.”