LME Al Inventory First Exceeds 2MT since Oct 1994

Primary aluminium inventory held by London Metal Exchange (LME) exceeded 2 million tonnes for the first time since October 1994, which surged by about 100,000 tonnes on 17 December from the previous day. Aluminium suppliers, traders and users are hurrying to cash ingot when global economy trend becomes more and more unforeseeable. Primary aluminium inventory at LME designated warehouses totaled 2.04 million tonnes. The inventory increasing trend seems spreading from North America to Europe. This suggests aluminium demand is declining worldwide.

LME primary aluminium inventory increased by 27,875 tonnes in Detroit and by 20,200 tonnes in Mobile, the USA on 17 December from the previous day, where automotive industry badly slows down. The inventory surged by 12,475 tonnes in Rotterdam, the Netherlands and by 10,325 tonnes in Liverpool, the UK. Inventory expansion indicated sharp recession of global aluminium demand.

LME primary aluminium inventory maintains upward since October, when aluminium suppliers tend to sell more ingot to LME warehouses with high concerns on the buyers’ credit risks. At the same time, actual demand for primary aluminium is seriously weakening from automobile and construction related industries since global economy is affected by financial crisis after Lehman Brothers’ collapse.

A Japanese trader source analyzed many aluminium users are canceling their orders with slower demand, and then, aluminium suppliers and traders are bringing canceled ingot into LME warehouses.

Current LME aluminium price is said lower than the smelters’ breakeven points. Many smelters are entering output reductions in North America, where the economy recession is remarkable, and in China, where smelting cost seems relatively high. However, these production cuts are even smaller than the demand declines. Global aluminium supply appears still surplus against the consumption.