Most of the aluminium that hit London Metal Exchange (LME) warehouses this month came from Citibank according to sources claiming familiarity with the matter.
According to reporting in Reuters late last week, a relatively high cost in borrowing money has clamped down on holding aluminium outside of LME warehouses as collateral for financial deals to sell it at a higher price later. Sources say more financing deals have expired than entered into in October, leading to the LME’s aluminium stock to rise to twice its previous volume to 587,100 metric tons.
The situation is a significant reversal from only a few months prior, as August saw stocks in LME warehouses hit three-decade lows.
The lack of available aluminium projected for this month led to aluminium buyers being assessed a premium for delivery of over US$10 per metric ton in October out of concern for possible shortages.
In order to end the premium, Citibank deposited significant amounts of aluminium at Port Klang warehouses earlier this month, according to two sources who spoke to Reuters. Port Klang’s overall stock of aluminium rose to 381,425 tons last Saturday, more than doubling. Per the sources, the majority of those deposits came from Citibank.
Per an unidentified industry source who spoke to Reuters, this act allays recent fears.
“All these (aluminium) units coming back onto the LME, shows there is plenty of material around.”
Analysts predict the year will end with a deficit of 600 thousand metric tons of primary aluminium, which is a downward revision from the 1.8 million metric ton shortfall predicted for the year several months ago. Experts predict that deficits won’t be substantial thanks to a corresponding slowdown in demand from Chinese manufacturers.
Recent drops in demand have pulled the price of aluminium down with it, falling by over 80 percent from all-time highs reached in the spring.
