MI aluminium stocks analysis: Three-week surge

LME-registered stocks of aluminium rose by a net 22,225t last week, meaning the overall surge higher has continued for three straight weeks. In that time the headline figure has mushroomed by almost 90,000t and it’s clear we’ve been seeing a major movement of metal from the off-market to the on-market sphere. The focus of the surge has been primarily in the US—which is not entirely surprising given it is also the probable point of maximum demand weakness. However, within the US the torrent of warranting activity switched mid-week from Baltimore to Chicago. The former received 19,990t over Monday-Wednesday, while the latter received 17,950t over Wednesday-Friday. There was also the usual smattering of landings at Singapore and subdued arrivals at a number of other locations but it was the two US locations that drove the headline figure up to fresh 2007 and fresh 3-year highs with each passing day last week. Slowing the uptrend has been a robust level of daily draws thanks to the recent build in cancelled tonnage. That trend continued last week with another 14,950t moving into the cancelled category, which should underpin "out" side activity over the coming few days. However, direction will remain a function of how long this wholesale movement of metal onto LME warrant in the US continues. NYMEX stocks, meanwhile, are immune to what is happening in the LME system in the country. Warranted stocks fell a bit further last week by 220 tons to 18,130 tons (16,447 metric). Off warrant stocks remain low at 33,048 pieces.