COLUMN-Pain for aluminium shorts as LME gets squeezed again – by Andy Home (Reuters U.K. – July 13, 2018)

LONDON, July 13 (Reuters) – Aluminium hasn’t escaped the broader industrial metals rout. The London Metal Exchange (LME) aluminium price has on Friday morning touched $2,021.50 per tonne, its lowest level since April.

The “Russian Premium”, which resulted from the April 6 imposition of U.S. sanctions on Oleg Deripaska and his Russian aluminium empire Rusal, has been fully unwound.

The market is expecting sanctions to be lifted but aluminium’s slide is also part of a broader metals retreat as macro concerns trump micro narratives. That LME price, however, is for metal in three months time, a quirk of the London market that sets the global price benchmark.

Right now aluminium traders have much more pressing concerns in the form of a ferocious squeeze on the fast approaching July prompt date. This is a market that is no stranger to sharp contractions in LME time spreads, but these squeezes are becoming both more frequent and more violent.

The obvious explanation is that curve tightness reflects low LME stocks, which have fallen to pre-financial crisis levels. But is it now starting to tell us something more about what is happening to the massive off-market stocks that have been a feature of the market ever since 2008-2009?

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