Traders raid LME aluminum stockpiles as shortages loom

Almost 40% of London Metal Exchange aluminum inventories have been cancelled, or earmarked for delivery out of approved warehouses, as industry sources say the metal could be shipped to countries left short by the closure of the Strait of Hormuz.

A total of 98,150 tons of warranted aluminum – that available for delivery – was cancelled in warehouses in Port Klang, Malaysia, on Monday, LME data shows.

It was not immediately clear which entity or entities had made the cancellation or why; the backwardation structure in the market typically attracts metal to the LME.

Worries about tighter supplies have created a backwardation, or premium along the aluminum contract maturity curve.

The premium for the cash LME aluminum contract over the three-month forward hit a high of $59 a metric ton on Monday, the most since February 2022 in the immediate aftermath of Russia’s full-scale invasion of Ukraine.

Total LME aluminum stocks are at 452,375 tons, the lowest since July – and 39.5% of that volume has been marked for delivery out.

More than 45,000 tons of aluminum were cancelled in LME warehouses in Port Klang last week.

Gulf smelters Qatalum and Aluminium Bahrain have already declared force majeure to customers as they are unable to ship due to the conflict in the Middle East.

(By Tom Daly; Editing by Chizu Nomiyama)