Aug 5 2003
Following a steep rise in the price of aluminium, the London Metals Exchange (LME), the worlds largest non-ferrous metals market, is investigating the possibility that traders were colluding to drive the price up.
The price rise was considered unusual as supplies are considered healthy, and the price increase only affected the cash price for immediately delivered product. The price of aluminium purchased for delivery in the future has not experienced the same marked increase. This behaviour is known as backwardation which often occurs when supplies are scarce, which is not the present case.
The cash price is normally lower than the future price, as the future price requires suppliers to store the stock.
To help track trades in aluminium, the most actively traded metal on the LME, the LME has reduced the size of any trade that is made from 100 lots (equating to 25 tonnes), down to 1 lot.
For more information on aluminium, click here.