MI aluminium stocks analysis: LME surges to fresh 3-year highs

LME-registered stocks of aluminium surged by 39,000t last week to a fresh 3-year high—the headline figure is now at its highest level since July 2004 and showing a year-to-date net increase of 180,200t, or 25.8%. This surge actually started on Friday, Aug 31 and the three main points of inflow have been Liverpool (13,100t on that day), Baltimore (31,075t over Monday-Thursday last week) and Hull (last Friday's 12,900t). Some commentators have suggested this sharp rise in warehouse inventories is down to the usual summer slowdown period, but that doesn't fit well with the tonnage/timeframe and the sense of deliberation by those delivering. How much more is to come is of course the big question. One point to note is that the accelerated inflow of metal onto LME warrant has masked an acceleration in fresh cancellation activity. There were 19,800t of fresh cancellations last week, which is the highest weekly total since the last week of May. That has yet to translate into actual draws but will do shortly. Whether it makes any impact on the headline figure will depend on for how long metal keeps hitting the system at the current pace. Meanwhile, already low NYMEX-warranted stocks fell another 110 tons to 18,505 tons (16,788 metric) thanks to Thursday departures from Toledo.