14.05.2024
TRAFIGURA DUMPS OVER 400,000 TONS OF ALUMINUM INTO LME WAREHOUSES
The aluminum price remained bullish throughout April, rising 11.47% month over month. However, prices found a peak on April 22 when they failed to break above their 2023 high. They then retraced to the downside during the remainder of the month and into early May.
Amid the aluminum price retreat, Trafigura dumped over 400,000 metric tons of aluminum into LME warehouses. Most of the volumes reportedly originated from India, although the dump potentially contained some Russian material. While others informed Reuters that an additional 400,000 tons potentially await delivery, the first delivery saw LME stocks jump 88% to their highest level since January 2022.
LME continues to navigate the dynamic market following sanctions from the U.S. and UK that banned the trade of Russian aluminum. The immediate aftermath saw traders attempt to game the system by taking advantage of rent-sharing deals. Meanwhile, the sanctions saw Russian aluminum classified into two categories: material produced before April 13 and material produced after, which would be subject to sanctions.
Major traders, including Glencore and Trafigura, ordered material produced before April 13. To profit from rent-sharing with warehouses, they then redelivered it to warehouses as the less desirable category. Assuming the material would remain unwanted, traders aimed to profit from storage fees. The LME followed such moves with their own efforts to disincentivize such withdrawals.
According to Country of Origin data from the LME, April saw a sharp decline in Russian stocks from March, amounting to nearly 200,000 tons. This caused the proportion of Russian aluminum to decline from 91% in March to 88% in April. The loss of Russian aluminum saw inventory levels drop considerably until the most recent delivery forced a sharp rebound.
Assuming Trafigura’s delivery is mostly Indian material, the sharp increase in stocks could weigh on aluminum prices. While Inventory levels do not offer a meaningful correlation to prices, they nonetheless help color overall market sentiment.
Globally, aluminum remains an oversupplied market.