Alcoa Inc. is calling out U.S. derivatives regulators for overstepping their authority and improperly influencing rules governing the world’s main aluminum exchange.

The company, which is the largest U.S. producer of the metal, told the Commodity Futures Trading Commission last week to back off from recent agency comments pressuring the London Metal Exchange to pursue new policies speeding up aluminum deliveries. Alcoa profit has been falling this year after faster deliveries from metal warehouses contributed to a decline in certain aluminum charges.

The CFTC’s actions are overpowering the LME’s discussions with the industry about how to set new rules for the aluminum market and have hurt Alcoa’s ability to have its voice heard, Max Laun, Alcoa’s vice president and general counsel, wrote in a July 27 letter to CFTC Chairman Timothy Massad.

“CFTC’s mission is to protect market integrity, not influence price levels,” Laun wrote. “In effect, the CFTC staff has told the LME what the results of its consultation process should be.”

Alcoa’s move is the latest front in a battle over rules underpinning the aluminum market that has led to U.S. congressional and regulatory investigations into traders, warehouse owners and the exchange. MillerCoors LLC and other metal buyers sparked the debate by complaining about long waits for aluminum from the warehouses and steep prices that resulted.

Inflated Costs

Steve Adamske, a spokesman for the CFTC, declined to comment on Alcoa’s letter. Kathy Alys, a spokeswoman for the exchange, declined to comment.

The LME, the world’s largest metal bourse, faced criticism that it permitted warehouse practices that constrained supply and inflated costs for consumers. The exchange took steps on its own in the past year to increase its oversight powers and require warehouses with long waits to load out more metal than they take in.

Prices for aluminum futures traded on the LME have dropped 20 percent in the last year. A premium to deliver the metal from warehouses in the U.S. Midwest, which also influences the prices that producers such as Alcoa can charge, has tumbled by 58 percent. Those price declines as well as a glut of aluminum from China have hurt producers’ share prices.

Alcoa last month reported profit that missed estimates. The company has declined 40 percent in the last 12 months.

The CFTC, which has been prodded by U.S. lawmakers to further scrutinize the industry, told LME in a March 24 letter that “more progress is needed,” especially for reducing wait times in Detroit warehouses.

Capping Rent

As a result of those concerns, the CFTC said it was deferring a decision to grant LME’s request for permanent registration as an exchange offering U.S. traders direct access. The CFTC’s head of market oversight said in the March letter the agency’s staff was encouraging LME to focus on efforts that would cap or ban rent policies at warehouses.

On July 1, LME said it was planning additional measures to speed up the wait times, including capping rent, and asked the industry for comments. The bourse has said that setting maximum rents would help to move metal more quickly.

The LME said the cap proposal, “has significant support from certain quarters, including regulators in the U.S.” That was a departure from March, when LME had said there were several risks in pursuing a cap, including potential litigation, and that the exchange hasn’t historically viewed the policy as a viable option.

Alcoa said LME’s switch in position stems from the “clear message” sent from the CFTC. The company asked the regulator to withdraw its March 24 letter, and suggested that if the agency wants to scrutinize aluminum trading that it set up a “fair, inclusive and open process” of public discussions.

So far, the regulator hasn’t agreed to discuss the issues raised in the March letter with Alcoa and hasn’t responded to the company’s freedom of information request about the agency’s views, according to the July 27 letter. Alcoa asked for a meeting later this month with Massad and its Chief Financial Officer Bill Oplinger.