LME aluminium on-warrant stocks at lowest levels since Dec 2005; small uptick in prices

London Metal Exchange aluminium stocks dropped below the 1-million-tonne mark for the first time since October 2019 and on-warrant volumes were at their lowest in nearly 16 years on Tuesday November 9, while the metal complex’s prices were little changed from the end of trading on Monday.

There was a 21,925-tonne fresh cancellation of aluminium on Tuesday, spread mostly between warehouses in Singapore (13,025 tonnes) and Johor (7,900 tonnes), with 1,000 tonnes booked for removal from Port Klang as well.

This, together with a 9,000-tonne outflow of material from those warehouses as well as some from sheds in the United States (225 tonnes) and Europe (850 tonnes), took aluminium’s on-warrant stocks, at 599,925 tonnes, their lowest since December 2005.

Aluminium’s three-month price edged slightly higher on Tuesday morning, up by $7 per tonne to $2,612 per tonne from Monday’s closing price.

There were small increases across the other base metals, with nickel’s three-month contract up by 0.4% to $19,725 per tonne shortly after 9am, from $19,640 per tonne on Monday at the 5pm close.

The stainless steel ingredient’s stocks also continued to drop on Tuesday, with a 1,680-tonne outflow and a 198-tonne cancellation to put on-warrant stocks at 71,370 tonnes.

“In line with us seeing the recent weakness as a correction within a bull market, Monday saw an attempt to arrest the slide in the base metals prices. Today, we wait to see if there is follow-through buying after the initial weakness,” Fastmarkets’ head of base metals and battery research William Adams said.

A falling US Dollar Index, which was recently at 93.96 and down from 94.02 Monday’s 5pm close, was price-supportive.

Nevertheless, concerns about the Chinese property market and energy crisis capped further increases, Marex’s LME Desk analyst Anna Stablum noted on Tuesday morning.

“The Federal Reserve flagged that the real-estate problems in China could spread to the US in its Financial Stability Report. The Fed also highlighted worries about high asset prices and said prices could plunge if the economy slows down,” she said.

Other highlights

  • The copper cash/three-month spread tightened to $311 per tonne backwardation on Tuesday at 9:30am, from a $258-per-tonne backwardation at the close on Monday.
  • There was a net decrease of 5,975 tonnes in the red metal’s stocks on Tuesday, taking on-warrant levels to 44,750 tonnes.
  • Economic data out later on Tuesday includes German economic sentiment indicators from the Zentrum fur Europaische Wirtschaftsforschung (ZEW) and US data on the National Federation of Independent Business small business index and producer price index.
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