LME aluminium reverses downtrend but surging inventory may cap the price rise

LME aluminium is finally showing some signs of recovery. The light metal contract closed at US$2,164 per tonne on Thursday, February 15, up from US$2,138 per tonne on Wednesday. However, the dramatic rise in LME aluminium stocks is likely to create a downward pressure on the price rise.

The Exchange’s stock report on Tuesday, February 13, showed a cumulative built up of 265,475 tonnes of the metal, of which 166,225 tonnes only “arrived” in a single-day record arrival on Monday. Over the last five days, LME aluminium stocks have ballooned by almost a quarter of million tonnes.

Industry expert and Reuters columnist Andy Home says, “They are, however, a timely reminder that there is still a lot of aluminium “out there” beyond the statistical reach of the world’s exchanges.”

“We may not get to see it often but this iceberg inventory exerts its own gravitational influence on the LME aluminium price.”

Quite logically, this LME aluminium warehouse picture seems to be painting a fuzzy picture of the global aluminium demand-supply outlook. While consensus says ex-China world is experiencing a widening supply deficit, the growing LME inventory haunted by “ghost stocks” tells a different story altogether.   

As on January 15, LME official cash buyer aluminium price (Bid Price) stands at US$2,163 per tonne, cash seller & settlement aluminium price (Offer price) is US$2,164 per tonne, 3M Bid Price is US$2,164 per tonne, 3M Offer Price is US$2,165 per tonne, Dec1 Bid Price is US$2,215 per tonne, and Dec1 Offer Price is US$2,220 per tonne. LME aluminium opening stock stands at 1303825 tonnes, total Live Warrants is 1101050 tonnes and Cancelled Warrants 202775 tonnes.

The Asian reference price for LME aluminium (3-months ABR) is US$2,190 per tonne.