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Future LME: new LME calculation method

Rovato, April 23rd 2021

Subject: Future LME – new way to form Eural prices only for BARS

Dear Customer,
Due to the uncertainty on costs increases and scarcity of raw materials in the market, and due to the tendency of increasing our lead times, we are obliged to take measures to protect our business and the business of our customers. We believe that it is very important to pay the material at the market value of the moment when the material is physically received, so with this objective in mind we decided to change the way we will form our prices, with the following methods.

Method “Future LME”

LME is the average of the value “Al 99,7% 3 months seller” of the second month prior to the delivery date indicated on the Order Confirmation sent by Eural.

Method “Future LME 4 Months Period”

LME is the average of the value “Al 99,7% 3 months seller” of the second 4 months period prior to the 4 months period of the delivery date indicated on the Order Confirmation sent by Eural. This method can be applied only to frame contracts of one-year basis, with deliveries starting from Jan 1st 2022.

STOCK

Stock material will always have the LME value “Al 99,7% 3 months seller” of the day of the order.

These methods will be applied to all new sales and new frame contracts starting from April 26th 2021, and they will be the only methods we will use, until the situation will remain particularly risky for Eural and our Customers.
We hope to have your appreciation on our decision, which has been taken to avoid any possible opportunity of speculations.
Please read carefully the Frequently Asked Questions on the next page. For any further doubts, please do not hesitate to contact Eural personnel.

In faith

Giorgio Di Betta
Sales Director
Eural Gnutti S.p.A.

FAQ

What will happen to all existing contracts?

Eural always respects all active contracts and conditions, so there will be no changes.

Can a Customer use former ways to form LME?

No, actual market conditions are too speculative, so Eural decided to offer only Future LME methods.

Can a Customer choose between “Future LME” and “Future LME 4 Months Period”?

“Future LME 4 Months Period” is reserved only to yearly frame contracts with deliveries on a regular basis, first delivery later than Jan 1st 2022. All other frame contracts, or spot orders, will be confirmed with “Future LME” method.

Can a Customer change the requested delivery date, after receiving the order confirmation

The date indicated on the order confirmation determines the way to form LME. E.g. if the order is for January, LME will be the average of November. Customer can ask to postpone the delivery date afterwards, but the price will remain with the LME of November.

What will happen if Eural delays or anticipates the delivery? Or if a Customer collects the material later or sooner?

According to the previous example, if the delivery will be on February, or December, instead of January, the LME is always the average of November.

What will happen if the material is ready with two months in advance?

In this rare case, Eural and Customer may agree to use LME average of one month prior to the date of the invoice.

When a Customer will know what will be the definitive price?

The first of the month prior to the confirmed delivery date. Therefore, on December 1st the Customer will know the LME of November, which will be applied to all products confirmed for January. In case of the “Future LME 4 Months Period”, on January 1st, May 1st, September 1st.

Do we still need frame contracts? Does it make any sense to have them?

Yes, because Customers fix the price list. Moreover, a frame contract is necessary to settle orders with “Future LME 4 Months Period”, otherwise such method is not applicable.

What will the documents look like?

The Order Confirmation will have the indication of the transformation price, and it must indicate: “To the above prices it must be added the average value “LME Al 99,7% 3 months seller” of the second month prior to the delivery date indicated in the present order confirmation, also available at www.eural.com”. Invoices will have the full price, and will also have per each article the LME used, e.g. “LME 11.21: 1,86 €/Kg”.

What if a Customer still wants to have a fixed known LME at the moment of the order?

Under actual market conditions, Eural decided not to offer under such conditions, as it is too speculative and too risky for Eural and for our Customers.

For how long Eural will apply “Future LME” methods?

Eural will apply these two methods until the situation will remain particularly risky.