Hidden inventories of aluminum are around twice those officially registered on the London Metal Exchange but are starting to fall as demand improves, the chief executive of Rio Tinto Alcan said Tuesday.
Jacynthe Cote also said the American Metals Market aluminum summit that official LME stocks are coming down.
"The market is gradually recovering and prices are improving," she said. "LME stocks are falling from record highs and hidden inventories are twice those on the LME, but they're coming down also," she added.
Stocks held officially in LME warehouses total 4.66 million tons, a factor that has acted as a constraint on prices in recent months. Improving demand is changing that dynamic, she said. Stocks are either registered officially as being "on warrant" or can be stored "off-warrant," meaning they don't show up in official data.
Rio Tinto Alcan is a subsidiary of London-listed Rio Tinto PLC (RTP).
Cote noted that financing deals that lock up aluminum are acting as a constraint on metal availability, also helping create better market fundamentals. But she said she is "cautious" about how long this situation will last.
These deals were put in place as aluminum prices slumped during the downturn and metal was sold or pledged to raise much-needed working capital. Investors, traders and banks bought inventory at spot prices and sold futures one to two years forward in so-called financing deals. Storage deals rely on low interest rates and prices being higher in the future than they are now, a pricing situation called a contango.
"I'm cautious about this element of price support, because when interest rates start to rise, financing deals will need a much deeper contango to be sustained," she added.
豫公网安备41010502003434号