Largest Rotterdam ali delivery since 2014 ‘only the start’ of increasing stock levels, sources say

Market participants say they expect more deliveries of aluminium metal into London Metal Exchange warehouses over the next few days after more than 100,000 tonnes were delivered into Europe in the morning of Thursday April 12.

The large delivery comes three days after the LME announced that it will suspend the placing of Rusal metal on-warrant with effect from April 17.

The suspension was a reaction to the US Treasury’s announcement on Friday April 6 that it had placed sanctions on Rusal’s non-executive board Member Oleg Deripaska and Rusal shareholder EN+ Group.

Some 69,375 tonnes of aluminium was delivered into Rotterdam on Thursday, the largest single inflow since July 2014, with the metal mostly believed to be Russian material. The remaining tonnages were delivered into Vlissingen.

“This is just the start of a large inflow, it was always going to happen when the LME put a time limit on Rusal warrants coming on-warrant with the suspension,” a trader said.

The exchange said the suspension will last until further notice while it continues to consult the market.

There is a general consensus among traders spoken to by Metal Bulletin that the suspension will cause a further mass inflow of stock to the exchange.

“That wasn’t a shock though, was it? I don’t know what else the LME expected – it was always going to flood the market,” a second trader said.

The large inflow put a dent in aluminium prices which had been on a constant rise since the US sanctions were announced.

The LME three-month aluminium price climbed to a high of $2,277 per tonne on Wednesday April 11 – the highest since January 2 and a 10.5% increase since the start of trading on Monday. But the stock delivery caused the price to drop by 1% on Thursday.

“There will be more [deliveries] before April 17 – a kneejerk reaction maybe, but people want to protect themselves,” another source said.

“We would expect at least 200,000 tonnes to arrive, but some say even more. It is not surprising and everyone expected it,” a third trader added.

Some participants see the deliveries as a protective measure because some banks are now unable to finance Rusal metal, prompting metal holders to deliver back onto the exchange.

“Maybe we can see cautious banks and large holders being pushed to deliver back to LME. I can imagine this is a bit irrational, because the sanctions only concern fresh Rusal material," a fourth trader told Metal Bulletin.

Tuesday’s LME notice to members stated that; “The LME understands that market participants are generally comfortable that dealing with warrants of Rusal brands relating to metal which has been produced and supplied by Rusal prior to 6 April 2018 would not constitute a sanction risk.”

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