Regular readers of this column will know that we have spent much of the recent past tracking the dominant long position holder in the aluminium market via the LME's daily compliance reports.
The passage of the March prime date saw a significant change. Although the most recent reports still show a long position holder on the cash and tom/next dates, it has dropped a couple of bands to "just" 50-80% of available LME stocks.
The change has been evident in the market's nearby structure. By the end of the third Wednesday (Mar 21) the cash-to-3-months period flipped from backwardation back to contango, where it has stayed ever since.
Indeed, there was a good amount of lending around last week, which pushed the period out to $32.50 contango as of Wednesday's close.
That followed 3-month metal's Monday slump to a low of $2,720 and subsequent dithering around the middle of the $2,700-2,800 range. With volumes evaporating ahead of the month-end and quarter-end and on the uncertainty created by conflicting US economic data, there was a sense of short-term speculative elements positioning themselves for a break of the lower end of that range.
It didn't materialise in the end. Oil prices were on the up, as were gold prices, with the strength feeding back into the LME complex over the second part of the week. Copper was attacking a key resistance level and aluminium was dragged up, slightly unwillingly it seemed, in its wake.
That generated a shift in sentiment with those hoping for further technical weakness forced to buy back both outright and spreads. Three-month metal made it as far as $2,800 on Friday but never looked in danger of breaking producer selling up there. It closed at $2,780, marking a less-than-exhilarating $17 weekly gain. The swift turnaround, however, saw the nearby cash-to-3-months period re-tighten to $11 contango as of Friday's close.
The word on the London "street" was that the dominant long had--for the time being at least--gone back to hide in the undergrowth, where other games seemed to be afoot last week. We and other observers could sense the passage of some of the market's bigger animals behind the tree-line, although with what intent remains obscure.
In particular, a severe hammering was meted out to option volatilities, with heavy-volume selling of both puts and calls reported on June and the whole forward volatility curve dragged down in sympathy.
Was it to protect a big long further forward on the curve, as some suggested? Or was it to deter producer selling? To be frank we don't know but it was probably the most interesting feature of the week…well…with one obvious exception.
UC RUSAL
Monday brought confirmation that the mega-deal involving Russia's two producers—RusAl and SUAL—and the aluminium interests of Glencore had been completed.
RusAl's Krasnoyarsk smelter in Siberia has just applied to the Guiness Book of Records for the largest aluminium ingot ever produced—34 tonnes apparently—and the formation of what is to be known as UC RUSAL breaks all sorts of other aluminium records.
Four bauxite mines, 10 alumina refineries and 14 smelters give it an annual alumina capacity of around 11 million tonnes and an aluminium capacity of around 4 million tonnes. As such it is now the world's biggest producer.
The giant seems set to grow further with UC RUSAL making no secret of its ambitions to expand. RusAl had been signing agreements all around the world to construct integrated power-aluminium complexes even prior to the merger. Last week brought news of another one—this time in Indonesia.
A new smelter is being fired up on its home turf—the 300,000tpy Khakaz smelter—and there are several other domestic projects in the works. The company even seems to be confident it can turn around Nigeria's "bad dream" smelter—the Ikot Abasi plant it bought early this year.
In terms of physical market
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