* Rusal sends letter to customers after LME reform halted
* Denies trying to "stifle" reforms, freeze status quo
* Says reforms would not have freed up metal for consumers
By Eric Onstad
LONDON, April 7 Russian aluminium giant Rusal
, which won a court ruling last month that halted a key
metals warehouse reform, has defended its move, denying it was
seeking to freeze the status quo and "stifle" reforms.
Rusal, in a letter to customers seen by Reuters, was
appearing to respond to harsh criticism by some aluminium buyers
of its court case against the London Metal Exchange (LME), the
world's biggest market for industrial metals.
The LME had planned to impose new regulations on April 1 on
warehouses after long-standing complaints about delays of over a
year to access metal at some depots.
But a reform to speed delivery of metal from the exchange's
global network of warehouses was stopped on March 28 after a
judge agreed with Rusal that the LME's consultation was unfair.
Loss-making Rusal worried the reforms would further depress
the price of aluminium, widely used in drink cans, vehicles and
Consumers had bitterly complained about difficulty in
obtaining metal, even though millions of tonnes of inventories
sit in depots, due to financing deals and also because of LME
rules that have allowed long queues to develop.
The chief of U.S. firm Novelis, one of the world's largest
users of aluminium for products such as beverage cans, had
attacked Rusal following the court ruling, saying it sanctioned
"the continuation of this destructive regime".
Rusal, in the letter to customers, denied it was obstructing
progress and said it hoped to help craft new reforms.
"Far from trying to stifle the LME's proposed reforms and
preserve the status quo, Rusal recognizes that the LME has a
difficult task to develop a strengthened regulatory framework,"
said the letter, signed by Steve Hodgson, Rusal's head of global
sales. "Rusal remains ready to contribute to a renewed
consultation process, that will be fair and of benefit to both
producers and consumers."
A spokesman for United Company Rusal Plc confirmed it had
sent a letter to customers on Friday in an effort to provide
background on the court case and its aftermath.
The letter also warned about tight availability of metal
even if the reform had gone ahead.
"It is doubtful that the proposed new rules will address the
availability problem as most of the metal is likely simply to
move to off-warrant warehouses and thus (be) still unavailable
to consumers," it said.
Warrants are LME ownership documents for metal stored in its
warehouses, but financiers often store metal in off-exchange
depots due to lower rents.
Rusal said it was also worried about the increasing gap
between LME aluminium prices and the total price consumers must
pay for spot metal, which includes record-high premiums.
"The current situation in which the LME price is showing
increasing divergence from the all-in price of aluminium is not
in the interests of consumers or producers, and also one that
concerns Rusal," Hodgson said in the letter.
"The industry needs a transparent price discovery system
that allows rational decisions to be made on the basis of
physical supply and demand."
LME benchmark three-month aluminium has gained 7
percent over the past 2-1/2 weeks, but it is down about a third
due to an over supplied market since touching a peak of $2,803 a
tonne in 2011.
The LME is owned by Hong Kong Exchanges and Clearing Ltd
(Reporting by Eric Onstad, editing by David Evans)