LME aluminum queue jumps to five months after Trafigura delivery
The wait to take delivery of aluminum on the London Metal Exchange went from zero to more than five months after a massive delivery of metal from Trafigura Group in May.
Exchange data published on Monday showed a wait of 159 days for aluminum at warehouses owned by Istim Metals at Port Klang in Malaysia at the end of May, while no queue existed in April. That’s the longest queue in the LME system since June 2021, when there was a 168-day wait, also at Istim warehouses in Port Klang.
The Malaysian port was the location of a huge delivery last month, followed by a series of requests for the metal. Bloomberg has reported that Trafigura was behind the delivery, while banks and hedge funds including Squarepoint Capital LLP, Citigroup Inc. and JPMorgan Chase & Co. bought up the aluminum and ordered it out again.
Lengthy queues have been a regular hallmark of the LME aluminum market, causing controversy among buyers and headaches for the exchange itself.
A decade ago, the games played by traders, banks and warehouses to maximize their revenues by building up long queues drew fire from US regulators and consumers, prompting the exchange to introduce a series of new rules to clamp down on the behavior.
In response to the latest logjam, the LME has stressed that its rules have been designed to discourage the build-up of queues by traders or warehouses as a business model.
Among the rules the exchange has introduced was one that stops warehouses earning rent on any metal that spends more than 80 days in a queue.
Separate data from the LME on Monday also showed that a large volume of the metal delivered in May was of Indian origin. That had the effect of reducing the concentration of Russian stock in the LME warehousing to 42%, down from almost 90% a month earlier, even as the volume of Russian stocks rose.