MI ANALYSIS: Exchange stocks up again in August

Global exchange stocks of primary aluminium—those registered with the London Metal Exchange (LME), NYMEX and the Shanghai Futures Exchange (SHFE)—rose by 21,175t in August. It was the second monthly rise after July’s 32,461t increase.

The main driver of higher stocks last month was the SHFE, which rose by 20,969t, bringing the year-to-date increase to 43,429t.

The latter figure may be a little misleading since Shanghai stocks are doing nothing more than recovering from their recent lows and are still some way short of the 2007 peak of 100,000t seen just after the Lunar New Year holidays in March.

Indeed, the muted local stocks reaction to still super-strong production growth will encourage the "China bulls".

Part of that production growth has gone into feeding the country’s soaring exports of "product" in the first part of this year. This has caused something of a displacement effect in other parts of Asia but an interesting point of note last month was the fact that LME stocks in the region actually fell by a net 3,700t.

LME stocks in every other major area/country also fell in August with one exception—the UK, where Liverpool received 13,100t on the last day of the month (last Friday).

That one-day surge was the only reason that LME stocks rose at all in August, even though the increase was a negligible 425t.

Elsewhere in Europe, LME stocks continued to be whittled away. Those in Italy (all at Trieste) fell by 2,700t to a residual 400t (all cancelled).

Those in Sweden fell by 250t to 6,950t, while those in the rest of Europe (the Netherlands, Belgium, Germany, Spain) fell by 1,025 to 76,400t.

This steady attrition of exchange inventory in the region is noteworthy because of the still low level of local producer inventory—see item above.

For the same reason, it’s interesting to note that LME warehouses in the US lost more metal last month—another 5,000t after July’s 5,675t—although they remain by some margin bigger than those in Europe.

NYMEX warranted stocks are low and continue to gently erode, slipping another 219t to 16,887t last month.

We don’t include off-warrant NYMEX stocks in our calculations because of the potential for overlap with the IAI’s producer stocks figures but they too are extremely low by historical standards at just under 31,000 pieces.