MI aluminium stocks analysis: LME steady at the highs

LME-registered stocks of aluminium rose by a net 1,300t last week with subdued inflow just about out-pacing even more subdued outflow.

The headline figure is now hovering just below its 2007 high of 837,250t recorded on May 4 and, if current trends are extended, it seems only a matter of time before a fresh high is recorded.

While arrival rates remain—as ever—something of an unknown until such time as the metal shows up in the LME’s daily reports, falling cancelled tonnage suggests that draw rates are poised to drop a gear in the very short term.

Fresh cancellations were just 2,400t last week, which was the lowest weekly figure seen so far this year. The ratio of cancelled tonnage has slid to a highly unimpressive 2.1%, while in outright terms cancelled tonnage is heading back to the ultra- low levels seen around the middle of last month. That resulted in low (less than 1,000t per day) draw rates for several days before a sharp rebound in cancellations on May 2 (9,975t of them) turned things around.

Only three locations hold even moderately high cancelled tonnage—Singapore with 4,850t, St Louis with 3,250t and Detroit with 2,000t—so the pace of movement at these three will determine the overall daily draw rate in the next few days.

While LME stocks show every sign of rising further, those registered with the NYMEX continue to fall. Warranted stocks edged 44 tons lower to 12,459 tons (11,303 metric) last week. Off warrant stocks fell by another 1,528 pieces to 57,441—a year-to-date decline of 77,257.