News summary
The London Metal Exchange (LME) faces fierce competition for US$1 billion in aluminum stockscrashbandicootps5Investment banks and hedge funds are betting on rising aluminum prices, with bullish expectations reaching their highest in two years. Trafigura delivered aluminum metal to LME, while copper prices hit record highs on the New York Mercantile Exchange.
Newsletter text
[Market bullish expectations for aluminum prices reach their highest level in two years] In the US$1 billion aluminum inventory battle that broke out on the London Metal Exchange (LME), global commodity trading giant Trafigura competed fiercely with Wall Street investment banks and hedge funds. On May 25, Trafigura delivered a large amount of aluminum metal to LME, but it encountered institutions such as Squarepoint Capital starting to buy and bet on an increase in aluminum prices. Over the past year, Trafigura has accumulated aluminum stocks in Port Klang, in part thanks to a contract with Indian supplier Vedanta. Typically, traders hoard aluminum ingots in the hope of making a profit through a physical premium above the LME price. When demand exceeds supply, site-specific premiums for aluminum rise. However, Trafigura recently registered 650,000 tons of aluminum with LME, causing the number of warehousing certificates to surge, making it the largest single-day registration in 27 years. LME investors 'expectations for rising aluminum prices are high, driven by global production constraints and expectations of growing demand in China and India. Trafigura's decision confused competitors, possibly due to the consideration of selling metals on LME and charging future owners part of their storage fees. The LME's rule restrictions and the queuing situation in Port Klang make the market situation more complex. Traders are betting on higher aluminum prices, with LME aluminium prices rising about 4% since Trafigura delivered the metal. Aluminum prices hit a 23-month high after Rio Tinto announced force majeure. The copper market also staged a historic short run event. On May 15, Trafigura and IXM tried to buy physical copper to satisfy short positions on the CME exchange in the United States. COMEX copper prices soared, and short positions suffered from "forced short". On May 20, COMEX copper prices reached a record high, although they subsequently fell.
