LME week round up
24/Oct/2014 • In The News•
That’s LME week over for another year. We had over 30 meetings with producers and semi fabricators, 7 receptions and the main event itself; it’s been a long week but an interesting one.
A number of suppliers are cutting refined output and allocations for 2015 contracts. Despite this, buyers remain hopeful that their own output will remain similar to 2014 in the expectation that the abrupt slowdown in the summer will abate and pent up buying will show itself between now and the end of Q1 2015.
Many are concerned about the forward curve in Copper, with seemingly no shortage of material. Prompt material is trading at a $60 premium to 3 months – why is this? Conspiracy theories abound…
With regards to the Metals Exchange itself, the new charges were a hot topic and already we are seeing the LME start to discuss the increases with users, as they try to come to a happy agreement before the changes are implemented on January 1st. We are hopeful that this will see a reduction in the initial indications, especially in the near dates.
In a similar vein, there also seems to be a push to focusing on monthly single dates, and again we hope that the LME will listen to users to ensure that daily prompts are not slowly eradicated, as it is vitally important to physical users that we have the liquidity to price daily. The increase in margin rates under LME Clear has also been met with horror, with some users cutting positions by 50%, which will not help volumes. The push is of course East and getting more speculators to use Renminbi Mini Contracts, the first tool to be implemented by the Exchange.
Let’s hope these changes do not make it more difficult or expensive for us in the Physical Metals business to reduce risk but it looks like that’s going to be the case going forward. We must as a group continue dialogue with the Exchange but, at the end of the day, as the Exchange is now a “for profit” business we have to respect that the needs (and profit potential) of the many will always outweigh the few.
To end on a positive note, there doesn’t seem to be too much doom and gloom in the market and demand seems robust. All in all then, a good week. We’ll be unrolling the map next week and working out what material will be going where. We’d like to thank everyone that took the time to meet with us, invited us to their functions, gave their time and opinions, and of course all of those people we bumped into and exchanged cards with over a drink or two, maybe three…
If you are interested in Physical Metals, enquire online now.