February 13, 2014 / 9:07 AM / in 4 years

Aluminium financing deals to keep metal locked up in LME -Rio Tinto

LONDON, Feb 13 (Reuters) - Aluminium financing deals will continue to lock up substantial amounts of metal in the London Metal Exchange system, Rio Tinto Chief Financial Officer Chris Lynch said on Thursday.

Most of the roughly 5 million tonnes of aluminium in LME warehouses is locked up in financing deals. This involves an investor borrowing money at low rates to buy physical aluminium, striking a warehouse deal to store it cheaply and taking advantage of the market’s contango structure to sell it forward immediately at a profit.

This is partly responsible for the long wait times for metal that consumers have complained about. The LME last year announced plans to reduce queues, but financing deals remain popular.

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