Market sources told Fastmarkets that the port is ideal for sending material into neighboring Central and Eastern Europe, with trucking costs relatively low.
Stock levels in Italy have been rising since the start of the year, with most stock said to be in Trieste.
“I hear there is up to 85,000 tonnes in Trieste but at times there is up to 10,000 tonnes leaving a day. It is very quick and people are shifting things around,” a trader said.
Other traders said there could have been up to as much as 100,000 tonnes in Trieste in April and over 200,000 tonnes in Italy inclusive.
One source told Fastmarkets that a large amount of the material sitting in Trieste is not deliverable onto the London Metal Exchange but is still of P1020 specification.
“There is a lot of stuff sitting around in Trieste that catches people’s eye. There is strong opportunity for back-to-back deals,” a second trader said.
According to RS Metrics data, stock levels in Trieste have been rising significantly since December 2018. Prior to that there was just over 10,000 square meters taken up by aluminium at the port. In April 2019, there was over 15,000 square meters of aluminium in the same area.
Satellite image of aluminium stocks held in Trieste port, source: RS Metrics
Market sources told Fastmarkets you can calculate an estimated tonnage at a rate of 2-4 tonnes per square meter. This means there could be around 30,000-60,000 tonnes of aluminium at the port.
This does not include metal sitting in warehouses in Trieste, most of which is in off-exchange warehouses.
“I also heard some of the off-warrant warehouses were full and people were having to move stock around because there is a lot of metal around at the moment,” a source said.
The LME has eight registered warehouses in Trieste. Two are owned by Access World, and three each owned by Steinweg and P Global Services.
But LME data on March 8 shows just 9,375 tonnes sits inside LME warehouses in Trieste – this compares with 22,475 tonnes a year ago.
“Putting stuff in LME sheds right now isn’t where the business is. Even the stock that is LME deliverable, people are delivering it in and shipping it out quickly, on back-to-back deals,” a third trader said.
“Sometimes there isn’t a reason for stock to leave the ports,” he added.
Diversifying from Rotterdam
The rise in business in Trieste comes at a time when traders are also looking to diversify from the traditional port of Rotterdam due to quieter trading conditions there.
Multiple deals have been concluding in Italy on an fca duty-paid basis in recent weeks within Fastmarkets’ assessed range of $160-180 per tonne as of Tuesday May 7.
Some traders this week were able to conclude business as high as $181 per tonne to a consumer but the majority of trader-to-trader business is concluding in the low $160s.
“In Rotterdam, demand was slow and people were having more joy in the Italian market. We trucked a lot into other central European locations – it is easier and cheaper. People were questioning ‘Why should I ship to Rotterdam right now? What is the point?’,” the second trader said.
Business in Rotterdam has been slow for the past month, with poor demand and the cash/May LME spread in backwardation until late last week.
“It comes to a point where people think about moving stock to Italy to increase their chances of getting rid of it. Some traders are keen to sell Italy to get metal in the north,” a fourth trader said.
However, traders said Rotterdam will remain the hub of activity and the main port for aluminium due to its key location and lower costs.
If you were to stash material in warehouses in Europe, warehouses in Rotterdam have good incentives, sources said. Additionally, LME warehouses costs and fob components are slightly more expensive in Trieste than Rotterdam.
In Trieste, it costs 56 cents per tonne per day to store aluminium in an LME warehouse, compared with 55 cents in most warehouses in Rotterdam – apart from Vollers Group, which charges just 51 cents.
The fot (free-on-truck) rate in Trieste for LME-listed warehouses is €34.25 ($38.33) per tonne compared with €33 ($36.93) in Rotterdam.
“People will always go back to Rotterdam because that will always be number one and is where people are happy to store their metal,” a second market source said.
“It is just for now things were purely opportunistic,” he added.
Historically, there have been other instances of notable aluminium stock movements in Trieste. RS Metrics data shows a dip in stock levels between 2016 and 2017. Meanwhile, they hit close to current levels, of above 15,000 square meters in May 2015 and over 20,000 square meters in August 2014.
“Trieste has always been active for the same reasons it is now. Trucking into Hungary, Poland, the Czech Republic – all over Europe. It is just new traders on the block thinking they’ve found something new,” a third market source said.
Others added that in recent days volumes of stock being delivered out of the port have fallen further – with a lot of demand coming from a participants who was previously short.
“The supply component is well managed… the demand side hasn’t followed. You had good turnover in Trieste,” a fifth trader said.
“I wasn’t really buying it, but now it is just over 5,000 tonnes a week going out. This is not going to draw 100,000 tonnes lower. The original trade was that you had some shorts in Hungary,” he added.
Aluminium traders in Europe have been switching business to the Italian port of Trieste in the past month, due to high stock levels leading to opportunistic trading.