Top aluminium supplier United Co. RUSAL's seven-year term contract with trader Glencore International will allow the producer to secure sales at near record high premiums over spot prices this year, a RUSAL executive said on Thursday.
RUSAL will supply a total of 14.5 million tonnes of aluminium to Glencore over the seven years, of which 1.4 million tonnes will be delivered this year, Vladislav Soloviev, first-deputy chief executive of RUSAL told reporters at the sidelines of an industry conference in the southern city of Shenzhen.
"The term contract gave us an opportunity to sell for seven years," he said.
Soloviev later told Reuters: "Under the Glencore contract, we have not fixed the price. We fixed the market premium referenced to the LME."
The deal will further boost Glencore's dominant position in aluminium trade and could potentially exacerbate tensions over warehousing rules at the London Metal Exchange, where bottlenecks have formed as a result of metals being used for financing purposes, such as collateral for loans.
Aluminium consumers around the world are struggling to obtain the metal stored in warehouses owned by banks and commodity traders, and are paying high premiums despite the market being in chronic oversupply.
Glencore, which had another three-year supply contract between 2009-2011 with RUSAL, is rapidly expanding its lucrative storage facilities at a Dutch port of Vlissingen that has become a hub for storing aluminium.
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