LME Aluminium Inventory Surged by 16%, A New Pivot?

SHANGHAI, Feb 11 (SMM) - LME inventory surged 119,025 mt to 880,975 mt as of February, recording a daily increase of 16%, the fastest since last March, mainly contributed by Port Kelang (+53,650 mt) and Singapore (+66,650 mt).

LME inventory has been falling for quite some time since March 19, 2021, recording a combined drop of 61.27%. Then will the sudden surge in LME inventory signal a pivot of the overall trend?

SMM believes that there are potentially three causes for the surge in the overall stocks. First, the previous shipments of aluminium ingots to China was re-directed to South-east Asia as the import window closed in China, which have been registered as warrants and can be used as deliverable goods to short positions.

Second, the originally invisible inventories in South-east Asia may have turned into visible ones, which will also be used as a supplement to the low deliverable stocks. The purpose is to mitigate the risks of short squeeze on the back of rising prices.

Third, the shipments from South-east Asia that had been scheduled to be shipped to other countries were stranded locally due to high ocean freight that was even higher than local spot premiums. The stranded cargos became registered warrants to hedge risks of squeeze.