On Short Coverage, Aluminium Gains

Short-covering activity followed a recent decline in prices caused by a spike in stockpiles reported by the London Metal Exchange (LME) that led to a little uptick in aluminium yesterday, with the metal climbing by 0.54% to settle at 233.95. Data showed that LME warehouses were experiencing a major influx of aluminium, as stockpiles more than doubled in less than a week, reaching their highest point in over two and a half years.

The 424,000 metric tonnes of aluminium that commodity broker Trafigura sent to LME warehouses for financial transactions last week was a contributing factor in this price increase. The location of last week’s inventories was mirrored by new arrivals into storage facilities in Port Klang, Malaysia, indicating that Trafigura is still active in arranging rent agreements.

But in the middle of the glut of inventory, the proportion of Russian-origin available aluminium stocks in LME-approved warehouses fell a little bit, indicating continuing changes in market dynamics since the LME banned Russian aluminium, copper, and nickel from its system.

Concerns about the predominance of Russian-origin metal in LME inventories were the reason behind the restriction, which was put into place in April to comply with fresh U.S. and UK sanctions over Russia’s invasion of Ukraine in 2022.

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