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Last swing on the LME Aluminium Stocks Roundabout? Andy Home

In the last six months, 156,000 metric tonnes of aluminium metal have been deposited in London Metal Exchange's warehouses.

It's beginning to look as if the stock battle that has characterized LME aluminium trade for more than a year is coming to an end.

The volume of metal is decreasing. This has led to a battle between financiers, traders and warehouses. Almost all of the aluminium that was just delivered on LME warrant came from the existing LME offwarrant stock in the same Malaysian facility.

The Port Klang stock shuffle had little effect on the overall inventory picture. The total LME stock, including both registered and non-warranted stocks, is still down almost 300,000 tons since the beginning of the year, at 717,000 tonnes.

LME's time spreads are not easing despite a recent influx of "arrivals", as reported in daily LME inventory reports.

This also provides a clue to the reason why Port Klang's storage capacity, as registered by LME, has been shrinking steadily.

PORT KLANG RUNDABOUT Since May 2024 when 650,000 tonnes of aluminium were dumped in LME warehouses at Port Klang, the battle over aluminum stocks has been raging. According to reports, the seller, Trafigura trade house, would earn more from a rent sharing deal with an LME warehouse company, ISTIM UK Ltd in this case, than a physical sale on an oversupplied marketplace.

The buyers were happy to learn that the metal was not Russian, as it had been recently sanctioned by the US and UK. The bad news is that the only option to break the pre-negotiated deal for storage was to cancel and transfer the metal to another warehouse operator. The rush to move aluminum created a queue similar to those at the LME during the 2010s.

At its peak, the queue at ISTIM’s Port Klang Warehouses stretched 293 days in August 2024. It only vanished in May of this year.

Stocks have been restocked in ISTIM's warehouses following a recent stock churn caused by the squeeze on holders of short positions in April and May.

The volume of metal in India is significantly lower than last year, and the majority of it has been returned from non-warranty storage. Port Klang's total stocks have increased by only 41,000 tonnes since the end May, despite daily stock reports from the LME.

ISTIM does not seem to expect much more in the near future. The number of warehouse units listed on the exchange in the Malaysian Port has decreased from 22 to 13.

While other operators have increased the presence in Port Klang, the total LME Storage capacity has decreased by 15% since 2025. It is now half of what it was back in 2021 when ISTIM stored over 800,000 tonnes of warranted aluminum.

All Change, No Change

The LME time spreads are barely reacting to daily warranting. The benchmark cash to three-month period The market is unchanged since two months ago.

It's not because much has changed. The total LME inventories, registered and non-warranted, increased by only 36,500 tonnes between June and July. This barely dented a downward trend that began in May of last year.

Stocks are still hovering around their three-year lows. It will take more cash to stop the erosion of an inventory that was once a mountain.

The lack of new inflows may be due to greater opportunities on a market that is adapting to both a European phase out of Russian imports as well as the increase in U.S. tariffs of 50%.

Physical arbitrage is more profitable than LME storage because warehouse operators like ISTIM no longer have the large storage revenues to compete with physical buyers for fresh metal.

There may also be a lack of aluminium available to fight for as China increases imports. In the first half of this year, the country imported 1.25 million tonnes of primary metals, mostly Russian. The pace of arrivals increased in July.

The LME warehouse roundabout has lost momentum, and it will continue to do so until operators are able to draw more metal from the physical supply chain.

These are the opinions of a columnist who writes for.

(source: Reuters)