Beer Companies Press LME to Cut Aluminum Warehouse Backlogs

A trade group representing brewers is urging the London Metal Exchange to take steps to reduce warehouse backlogs that beermakers say boost the cost of aluminum used to make drinks cans.

The Beer Institute in Washington pressed the exchange to “end restrictive and outdated warehousing rules and practices that are interfering with normal supply and demand dynamics,” according to a statement provided yesterday by Christopher Thorne, a spokesman for the group. Members include MillerCoors LLC and Anheuser-Busch InBev NV’s Anheuser-Busch unit, according to the organization’s website.

The beermakers join LME users including industrial copper companies in complaining about long waits for metal in warehouses monitored by the exchange. While the LME tried to quell those concerns by raising load-out rates, analysts such as Duncan Hobbs of Macquarie Group Ltd. said the new rules won’t improve access to metals at locations with the biggest backlogs.

“We want the LME to end restrictive load-out practices that create supply-chain bottlenecks,” which have “led to a complete disconnect between LME aluminum prices and actual aluminum prices and prevent brewers and their suppliers from obtaining aluminum in a reasonable timeframe at fair-market prices,” the Beer Institute said in the statement.

Load-out is the rate at which aluminum supplies leave warehouses.

“The LME shares the market’s concerns and have brought in a series of measures to relieve the situation,” Chris Evans, a spokesman for the LME, said by e-mail today. “We continue to monitor the situation and will act again if it is in the market’s best interests.” He said the exchange can’t comment on possible complaints.

Warehouse queues for aluminum have grown as more metal gets tied up in financing deals that typically involve a simultaneous purchase of metal for delivery in the near future and a sale for later delivery that takes advantage of a market in contango, where prices rise into the future.

The premium buyers pay to obtain aluminum in the U.S. climbed to a record 12 cents to 13 cents a pound this week, according to Austin, Texas-based researcher Harbor Intelligence.