Why Aluminum Is a Big Headache for Top Commodity Traders
The premiums manufacturers pay to secure metal supplies have collapsed
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When carmakers, can manufacturers or telecom companies need to buy metals such as copper and aluminum, they pay a premium to market prices set on the London Metal Exchange to reflect the cost of getting raw materials when and where they want them.
Those premiums, while a small percentage of the cost of metals, are vital for commodity traders, who buy from producers and sell to end users. In recent months those margins have plummeted, threatening profits at traders including Glencore Plc and Noble Group Inc.