Trafigura’s aluminium buying adds to LME supply squeeze as stocks hit 36-year low

Commodity trader Trafigura has built significant long positions in London Metal Exchange (LME) aluminium futures, adding to pressure in a market facing its tightest supply conditions in decades. The purchases are understood to aim to secure physical aluminium, as exchange inventories have fallen to their lowest level since 1990.

LME aluminium stocks currently stand at 226,350 tonnes. At the same time, the premium for contracts due for delivery in the near term over those with later delivery dates has reached its highest level in decades. Several large long positions are also in place ahead of the November contract's expiry. Although these positions are not at record levels, they are substantial compared with the metal available in LME warehouses.

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The combination of low inventories and sizeable near-term positions has contributed to a severe physical supply squeeze in the LME market. Spreads have eased slightly from their recent levels but remain historically high.

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The LME has measures in place to monitor large positions and limit their impact on the market. These include requiring participants to disclose detailed information about their holdings and allowing the exchange to direct them to take appropriate steps to manage their positions. Trafigura has yet to comment on its aluminium positions.