Trafigura Is Key Player in LME Aluminum Squeeze With China Trade

Résumé détaillé

Trafigura Group has bought up significant volumes of aluminum on the London Metal Exchange, making it a key player in a historic squeeze as inventories of the metal plunge.

Trafigura Group has bought up significant volumes of aluminum on the London Metal Exchange, making it a key player in a historic squeeze as inventories of the metal plunge.

Trafigura, one of the largest aluminum traders, has built up a significant long position in the LME aluminum market as it seeks metal that could be sold at a profit in China, according to people familiar with the matter, who asked not to be identified describing private information.

LME data show several large holders of long positions in short-dated aluminum contracts ahead of the expiry next Wednesday of the main contract for November.

While the positions aren’t big in absolute terms by historical standards, they are significant as a proportion of the available inventory on the LME. The positions in the November contract identified in the LME’s data are collectively larger than the entire 226,350 tons of exchange stocks, which are at the lowest since 1990.

The large positions have combined with dwindling aluminum inventories on the LME to help drive the market into the steepest backwardation in decades this week, with prompt contracts trading far above later-dated futures. Spreads eased slightly on Thursday but remain sharply elevated.

“The LME has a number of arrangements in place to guard against any undue influence of large or dominant positions,” the exchange said in response to questions about the large aluminum positions earlier this week. “The LME also routinely requests further position management information from market participants and has the power to require positions to be managed as appropriate.”

Trafigura’s move comes as the Chinese aluminum market is undergoing a major squeeze of its own. Chinese aluminum inventories have fallen sharply in recent months, and December delivery Shanghai Futures Exchange aluminum contracts closed 550 yuan a ton above contracts for delivery in January — the steepest backwardation for a front-month contract since 2002.

Over recent weeks, that market…

China…

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