One Party Controls Up to 90% of LME Aluminum Inventories Worth $505 Million

A single entity has taken control of up to 90% of the available aluminum inventories on the London Metal Exchange (LME), amounting to approximately $505 million, according to LME data released on Monday.

The identity of the party remains undisclosed, but such holdings are typically acquired by investors or traders seeking to capitalize on potential shortages or fulfill contractual commitments.

“It seems a fair assumption to think it must be a physical trader looking for metal to fulfil a physical short,” said Alastair Munro, senior base metals strategist at broker Marex. Recent warehouse activity appears to support this theory, with 32,175 metric tons of aluminum marked for withdrawal from LME warehouses within a week.

LME data from February 20 showed that a single party held between 80% and 90% of both aluminum and zinc inventories. The LME assured Reuters that it is monitoring market conditions closely and has controls in place to ensure market stability.

Total LME aluminum stocks currently stand at 535,900 tons. However, only 208,400 tons remain available after accounting for canceled stocks earmarked for shipment. The surge in aluminum prices, with benchmark three-month contracts hitting a nine-month high of $2,736 per ton, was driven in part by the European Union’s recent ban on Russian primary aluminum imports.

LME stocks have halved since May 2023, indicating a tightening market. This has led to an increased premium of cash aluminum over the three-month contract, reaching $38 per ton on February 17, the highest level since May 2023.

In the zinc market, a single party’s position was valued at approximately $370 million. Despite a drop in LME zinc inventories, mine production is expected to recover, and analysts forecast a global surplus this year, with no backwardation seen in key LME zinc spreads.