Aluminum Premium Seen by Harbor Falling After LME Warehouse Plan

Spot premiums for aluminum ingot will probably fall in the next few quarters after the London Metal Exchange’s decision yesterday to change the rules on warehousing to reduce waits for metal, according to Jorge Vazquez, managing director of Harbor Intelligence in Austin, Texas. The following are comments he made by e-mail today.

“The LME’s ruling is an official acknowledgment that the LME warehousing system that was in operation was being used as a platform to inorganically inflate aluminum premiums at the expense of the aluminum consumer and at the benefit of some warehouses, banks and trading companies.

‘‘The decision taken by the LME in principle seems to be intended to help reduce the gap between what the LME is today and what an efficient, fair, transparent and balanced market should be.

‘‘Spot ingot premiums should fall in the quarters ahead toward more organic levels while the LME price may experience an upward re-pricing as the market factors in better conditions to purchase and load-out physical aluminum in the LME and expectations of falling LME inventories.’’

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