Metal Exchange investigates aluminium trades

The London Metal Exchange has launched an investigation into possible collusion in the aluminium market, which could be behind a steep rise in prices. It is feared that some traders may be acting together to squeeze prices.

The LME, the world's largest non-ferrous market, said it was responding to recent price movements, which has seen the cash price - the price for immediate delivery - shoot up, while stock levels appear to be healthy. It has meant that buying aluminium for delivery now is considerably more expensive than buying for delivery at a future date, which is known as "backwardation".

Kevin Noorish, head of commodities research at Barclays Capital, said: "Backwardation is normally a sign of scarcity but aluminium stocks are extremely high. In these circumstances, market manipulation is always the suspicion and fear."

Most of the dealers that use the LME will be involved in both the physical market in aluminium trading and playing the futures market. A concerted effort to drive up prices would require people colluding in both the physical and the futures market. Aluminium is used by a variety of manufacturers, from aircraft to drink cans.

The exchange said it was immediately reducing the size of trades that must be reported from 100 "lots" (each 25 tonnes) to 1 lot - so that it can monitor trades more carefully. LME trades metals worth some $2,000bn (£1,244bn) a year and aluminium is the most actively traded. The LME said: "The investigation will cover the price curve and its development over recent weeks, LME stock levels and movements both on to and off warrant [a document entitling the owner to physical delivery of aluminium], cancellation of warrants, off-warrant stock levels, individual trading patterns and possible collusion between market participants."

Futures contracts are usually more expensive than the current of a commodity because it costs money to store a good for delivery months or years later. Aluminium for delivery now costs $1,481 a tonne, up from $1,340 at the start of the year. That compares the price for delivery in three months' time of $1,437 a tonne - the gap was even bigger at the end of last week.

Futures markets do legitimately go into backwardation but that happens when there is a physical shortage of a good. LME aluminium stock levels, at some 1.3 million tonnes, are at an eight-year high, so price movements have not reflected the underlying supply/demand situation.

Some traders said the manipulation of the market had long been evident and the LME action was a case of "closing the stable door after the horse has bolted". The Financial Services Authority, the ultimate regulator of the LME, has not, at this stage, begun its own investigation.

Suggested Topics
News
people
Arts and Entertainment
Lena Dunham
booksLena Dunham's memoirs - written at the age of 28 - are honest to the point of making you squirm
Arts and Entertainment
A bit rich: Maggie Smith in Downton Abbey
tvDownton Abbey review: It's six months since we last caught up with the Crawley clan
Sport
Frank Lampard and his non-celebration
premier leagueManchester City vs Chelsea match report from the Etihad Stadium
PROMOTED VIDEO
Life and Style
A new app has been launched that enables people to have a cuddle from a stranger
techNew app offers 'PG alternative' to dating services like Tinder
News
Jacqueline Bisset has claimed that young women today are obsessed with being 'hot', rather than 'charming', 'romantic' or 'beautiful'
people
Arts and Entertainment
Jake Quickenden sings his heart out in his second audition
tvX Factor: How did the Jakes - and Charlie Martinez - fare?
Sport
premier league
Arts and Entertainment
'New Tricks' star Dennis Waterman is departing from the show after he completes filming on two more episodes
tvOnly remaining original cast-member to leave crime series
Sport
Mario Balotelli celebrates his first Liverpool goal
premier leagueLiverpool striker expressed his opinion about the 5-3 thriller with Leicester - then this happened
News
ebooksAn unforgettable anthology of contemporary reportage
News
Britain's shadow chancellor Ed Balls (L) challenges reporter Rob Merrick for the ball during the Labour Party versus the media soccer match,
peopleReporter left bleeding after tackle from shadow Chancellor in annual political football match
Arts and Entertainment
Female fans want more explicit male sex in Game of Thrones, George R R Martin says
tvSpoiler warning: Star of George RR Martin's hit series says viewers have 'not seen the last' of him/her
News
i100
News
i100
Sport
Plenty to ponder: Amir Khan has had repeated problems with US immigration because of his Muslim faith and now American television may shun him
boxing
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Senior BA - Motor and Home Insurance

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Market Risk & Control Manager

Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Head of Audit

To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

Day In a Page

A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments