LME may not launch aluminium premium contract until 2015

(Reuters) - The London Metal Exchange may not launch its new aluminium premium contract until early next year, the exchange's top executive said on Monday, months after a competing product from U.S. rival CME Group Inc is expected to go live.

The distant date for the new LME contract will stir the debate over its ability to resolve the years-long issue of backlogs and inflated physical prices that U.S. end users say are costing the industry $6 billion (3.6 billion pounds) each year.

"The regulatory process alone takes about six months, so we'll be pushing to get it done before the end of the year. It may not happen until the first quarter of 2015," Chief Executive Garry Jones said on the sidelines of the CESCO/CRU copper conference.

Consumers say the LME's mainstay contract is broken because of the yawning gap between the futures and the physical market.

Premiums paid on top of the LME benchmark for physical delivery have reached record highs and now account for about 20 percent of the LME price. Historically it had been around 10 percent.

In a notice to members on Monday, the LME said it planned a physically-settled aluminium premium contract and might expand it to other metals, but gave no details of the plan. The LME outlined the first details of its new contract plan in January.

The exchange, the world's biggest market for industrial metals, lost a court ruling last month that handed CME an unexpected windfall for its contract, a product launching May 5 that the CME hopes will lure clients from the dominant LME. The reform was aimed at cutting backlogs in the LME's global warehouse network.

Jones said in the interview the exchange will decide in the next few weeks whether to appeal the court ruling, which was obtained by Russian aluminium giant Rusal on worries the reforms would hit prices.

"We are cognizant of the fact we can't keep the market waiting forever," he said, adding the issue had been a "big and costly" distraction.

"The (warehouse reform) rule may still be implemented, potentially with revised timing periods, either as the result of an appeal or a fresh market consultation," the exchange's notice said.

The LME, owned by Hong Kong Exchanges and Clearing Ltd, had planned to impose new regulations on April 1 on warehouses after long-standing complaints about delays of more than a year to access metal at some depots.

OTHER REFORMS STILL ALIVE

Some analysts said frustration with the LME's reforms might lure some consumers to CME, which hopes to convince the 50 million-tonne aluminium industry to upend three decades of LME pricing and switch to the its upstart contract.

The new CME contract has the approval of at least one large consumer of aluminium, MillerCoors, which uses the metal to make drinks cans and has criticised the LME's handling of the problem.

The LME also gave an update of a series of other reforms, which have been unaffected by the court ruling.

The exchange has agreed on a format for publishing detailed data about each warehouse, including stocks coming in and out and waiting times in days for each metal. Currently, data is published for each location, not each warehouse.

The first monthly report will be published on May 12 regarding activity in April.

The LME had also promised as part of its wide-ranging reforms to publish more data about long and short positions, similar to the U.S. Commitments of Traders reports.

The first such report is due in the second quarter, it said.

(Reporting by Eric Onstad and Susan Thomas; Editing by Anthony Barker and David Evans)

Another Region Seeks To Join Russia Most Likely Moldova's Transnistira Region

"Who is next" in the great annexation scramble ? 

The most likely region to enter the USSR 2.0 next is Moldova's Transnistira region, where in a 2006 referendum some 97% of the population had voted to become part of Russia.

Moments ago this appears to have been confirmed after the president of the territory said the following, via Bloomberg:

• TRANSNISTRIA SEEKING TO JOIN RUSSIA AFTER WINNING INDEPENDENCE
• MOLDOVA'S TRANSNISTRIA REGION SEEKS TO JOIN RUSSIA: PRESIDENT
• TRANSNISTRIA PRESIDENT SHEVCHUK SPEAKING TO REPORTERS ON RUSSIA

One thing is certain: the "west" will not be happy as the Russian territorial expansion continues.

Stock Markets Bubbles and Parabolic Slope Theory By Dan Stinson

Is there a Stock Market Bubble? 

Parabolic Slope Theory

Firstly, what is a bubble from a technical standpoint? A bubble is a parabolic advance in a market or stock where the price appears to move straight up without normal corrections. The corrections or pullbacks are small, sending the stock or index straight up. Greed and euphoria are high and complacency is low. The higher the market or stock moves, the bigger the bubble and the more pain on the way back down. As we have seen, bubbles can occur in stocks, stock markets, commodities, debt, Real Estate and derivatives. 

Parabolic advances can't be sustained and always end poorly, with the price usually falling below the starting point of the parabolic move. What goes straight up, comes straight down faster and usually further. So, to determine if a bubble is in play, we need to analyze the advance to determine if it has gone parabolic. We know that parabolic advances always fail, so a parabolic advance in a market where it is questioned to be a bubble, will also fail or burst. [Parabolic advance = Bubble]

I have a number of charts illustrating past and current bubbles and have identified many common aspects of a bubble, which we have named as Parabolic Slope Theory (PST), with more information coming. For now, we can see that bubbles have an average parabolic slope of 70 degrees, but can range from 60 to 85 degrees depending on the starting point of that slope. We can sometimes see a 60 degree slope when starting at the beginning of the rally, but can see a 70 degree slope at the start of the parabolic advance. The slope becomes steeper as the rally matures and can reach 80 degrees or higher near the top. This 80 degree slope on some charts can be counted as as wave (5) up.

The first chart illustrates three bubbles for the S&P500, starting with the 2000 bubble with a slope of 68 degrees. The slope for the 2007 bubble ran at 60 degrees to the top. The current rally is running at an average of 70 degrees and has moved further and steeper than the parabolic advance from 1995 to 2000. It would appear that the markets are stronger now than in 1999, but it sure doesn't feel like 1999. We can also see that the parabolic advances into the bubble tops lasted for about 5 years, with the declines taking 2 years. We can't really utilize the 70 degree slope rule to determine where the top is in a bubble, but if we see a pullback and then see the parabolic advance turn higher at an 80 degree slope or more, then we could assume that the final wave up is in play. We also know that the markets are currently in the 5th year of this rally where the previous cycles suggest a top is due. Just knowing that it is a bubble will help us make the right decisions before the bubble bursts. Our previous newsletter adds insight on the timing for a top with the DOW and Nikkei relationship.

S&P 500 Parabolic Slopes and Bubble Tops 2000 - 2007 - 2014

The markets are in another smaller bubble, although the S&P500 chart would suggest that this bubble is larger than the 2000 bubble. This bubble call is supported by our 70 degree slope rule and many stocks that have also gone parabolic and are in the 70 degree range.

So, the next time we want to determine if a bubble is in play, we can
1: examine the slope of the advance and determine if it is parabolic move.
2: examine the corrections and determine if they are small. This will also be determined by the slope. If the slope is steep then the corrections will be small.
3: determine if greed and euphoria are high and complacency low.

This chart is only a guide so that you can follow the action and monitor the expected outcome. The action could play out exactly as illustrated or it may need minor adjustments as we follow it through.

CME Group Reducing Margins For Gold, Silver, Platinum

CME Group is lowering margins for gold, silver and platinum futures as of the close of business on Friday.

The exchange operator, in a notice issued late Thursday, said the changes are “per the normal review of market volatility to ensure adequate collateral coverage.” Margins act as collateral for a trade in a futures contract.

The “initial” margin to establish new speculative positions in the main Comex 100-ounce gold futures contract will decline to $7,150 from $7,975. The “maintenance” margin for existing speculative positions, as well as all hedge positions, will decline to $6,500 from $7,250.

For the main Comex 5,000-ounce silver contract, the initial margin for speculators will drop to $9,900 from $11,000. The maintenance margin for speculative accounts, as well as all hedge positions, will be reduced to $9,000 from $10,000.

Meanwhile, the initial margin for speculators in the Nymex platinum contracts will drop to $2,750 from $3,025. The maintenance margin for speculative accounts, as well as all hedge positions, will decline to $2,500 from $2,750.

CME Group is also lowering the margins for the smaller-sized gold and silver contracts. In addition, changes in margins were announced for a number of other markets, including coal, crude oil, ethanol, iron ore, hot rolled steel and freight.

The full CME Group notice can be viewed at this link.

April 2014 Important Data And Holidays

The Market Is Now Exactly As Overvalued As It Was At The Last Bubble Peak S&P 500

According to this chart from JPM the market's forward P/E ratio now is precisely 15.2x. What was it at precisely the last bubble peak on October 9, 2007? 15.2x. 

Everyone knows what happened next.

Zambia miners can’t afford 29% power price hike — chamber

ZAMBIA's EXPORT TREE

 Zambia’s copper and cobalt producers won’t be able to afford the 29% increase in the electricity tariff approved by the state regulator earlier this week, which will affect mining output, the country’s Chamber of Mines warned Friday.

The price hike in Africa’s second largest copper exporter after the Democratic Republic of Congo follows a series of standoffs pitting mining companies against the Zambian government, in a growing trend across the continent, as resource-rich states move to extract more revenues from global miners.

In a statement, Chambers of Mines of Zambia chief executive, Maureen Dlamini, said the increase didn’t take into consideration the delicate nature of the mining business, currently dealing with weak copper prices, down almost 10% this year.

The body represents major producers, such as Vedanta Resources (LON:VED), China Nonferrous Metals, First Quantum Minerals (LON:FQM, TSX:FM) and Glencore Xstrata (LON:GLEN), which have invested billions of dollars in expansion projects in the country in recent years.

Zambia’s mines use about 68% of the country’s electricity while less than a quarter of the population has access, according to Bloomberg.