Russia's Alcoa Union Company (hereinafter called "Russian") is on the London Metal Exchange (LME) warehousing new regulations.

Although RUSAL's “obstruction” can currently work for a while, the implementation of the new regulations in the future may cause even greater damage to russia, which has already suffered heavy losses.

LME new regulations blocked

In November of last year, LME announced a new warehousing business rule that mandates that warehouses with queuing time of more than 50 days foreign metal delivery must exceed metal deposits. This new plan, which began on April 1 this year, was suspended because of RUSAL's lawsuit.

At the same time, the LME plans to strengthen the regulatory requirements for companies that deal in both LMEs and their own metal warehouses to avoid improper disclosure of information and conflicts of interest.

Rusal previously claimed that LME's decision to publish a revised warehouse policy made mistakes, which undermined Rusal’s rights and did not consider other viable solutions to the long queue problem.

The major shareholder of the LME, the Hong Kong Stock Exchange ("HKEx"), recently announced that although in virtually all substantive and procedural issues concerning UC RUSAL, the court ruled that LME won the case and proposed amendments to the LME's warehouse policy. Substantive reasons There are no negative opinions, but on a specific procedural matter, that LME's advice should include or refer to the option to prohibit the collection of warehouse rents or to impose limits on such warehouses, the court ruled that Rusal Victory.

The Hong Kong Stock Exchange believes that the LME still believes that Rusal's complaint has no legal basis and is now re-inquiring about legal action on its possible actions, including appeals. Therefore, the amendments to the stipulations on the tying of metals into warehouses and shipments will not be implemented as planned on April 1 this year, but the remaining reforms announced in November 2013 will continue to be implemented as scheduled.

Rusal performance worse

Analysts believe that the new rules that shorten the time for LME shipments and require more shipments will lead to a sharp rise in aluminum supply in the market, which will narrow the aluminum premium, and will significantly affect the interests of aluminum producers. Rusal's request to the court to request the LME to withdraw the new regulations is mainly due to the fact that the spot aluminum supply gap will be hampered by the LME's new warehousing regulations, which may lead to a drop in aluminum prices and affect Rusal's performance.

Rusal has suffered serious losses in recent years. Rusal’s financial report showed that in 2013, it had a net loss of US$3.2 billion, an increase from the loss of US$528 million in the previous year, and was also the largest annual loss of RUSAL since 2008 with a net loss of US$6 billion. In addition, RUSAL's 2013 adjusted quarterly interest depreciation and amortization (EBITDA) also fell by 29% to US$651 million, which was lower than the expected US$692.6 million.

Due to the long queuing time for LME warehouses, which led to higher storage costs and higher costs for metal consumers, many American aluminum consumer companies such as Millercoors went to the US Commodity Exchange Commission (CFTC) due to rising raw material costs. Complaints and lawsuits were filed in the courts. The CFTC conducted an investigation in August last year. At the same time, these storage warehouses are mostly controlled by financial institutions such as JP Morgan Chase and Goldman Sachs, making aluminum prices easily manipulated. Last year, JP Morgan and Goldman Sachs were all accused of manipulating aluminum prices.

In fact, due to warehousing problems, LME has been litigated by numerous lawsuits. In its latest 2013 annual report, the Hong Kong Stock Exchange pointed out that LME was accused of anti-competitive and monopolistic actions involving aluminum prices in 26 US class actions. Among the 19 lawsuits, LME’s holding company LMEH was also listed as a joint defendant. . LME management still believes that there is no legal basis for the lawsuit and will actively defend it.

LME became a member of the Hong Kong Stock Exchange Group in December 2012. Its trading business performed outstandingly in 2013. The average daily transaction volume increased by 7% from 2012 to 676,283 contracts. Nickel turnover rose the most, reaching 23%, followed by copper and aluminum, with increases of 11% and 8%, respectively. The LME business contributed HKD 1.21 billion in revenue for the year, with a net profit of HKD 326 million, a significant increase from 2012.