LONDON (Reuters) – The giant London Metal Exchange (LME) aluminium stocks carousel is spinning again. LME-registered inventory surged by 58% to a two-year high of 1.49 million tonnes between the middle of November and the middle of December as 600,000 tonnes of metal flooded into exchange warehouses.
No sooner had it arrived than the cancellations started. A total 633,675 tonnes have been earmarked for physical load-out since Dec. 16, including another 35,075 tonnes on Monday.
Drawdowns are now accelerating. Load-outs averaged 13,330 tonnes per day last week. Monday’s tally of 15,375 tonnes was the highest daily departure rate since May last year. There are another 619,075 tonnes to follow.
None of this has anything to do with aluminium’s fundamental dynamics other than to remind us that there is a lot of metal around. Rather, it is all about the opaque, through-the-looking-glass LME storage market.
It’s why the exchange is implementing yet another raft of changes to its warehousing function. The mechanics behind the original November-December stocks surge are relatively straightforward. The LME aluminium forward curve started tightening in September.