MI aluminium stocks analysis: Shanghai higher

Stocks of primary aluminium registered with the Shanghai Futures Exchange (SHFE) rose by 3,699t to 27,654t in the week to Thursday. It was the second consecutive weekly rise but, as the chart shows, registered stocks are still low by historical standards. However, the Chinese government's removal of export tax rebates on most forms of product have come into effect at the beginning of this month and it will be interesting to see whether that slows the flood of product leaving the country. If it does - and the jury is very much out on this point - we'd expect to see local stocks rising over the summer period. Activity in the LME system was yesterday largely confined to Singapore and Trieste. The former is currently seeing accelerated inflow - the four-day total is 8,700t - which is easily outpacing draws at this location. Trieste remains active on the "out" side as previously cancelled metal is drawn down daily but outside of those two locations activity is dying a death. That's a function of low cancellation rates and the concentration of cancelled tonnage on just two locations - Trieste and Singapore. Yesterday's fresh cancellations did no more than halt the downtrend in the ratio of cancelled tonnage - now at 2.9%.