LME Aluminium Stocks and Pricing Trends
London Metal Exchange (LME) stocks of aluminium have been steadily decreasing, reaching the lowest level since February at 443,000 metric tons. However, this decline in visible inventory hasn’t led to a bullish price movement. The LME three-month aluminium price has been decreasing, nearing its year-to-date low.
Physical Premiums Indicate Market Surplus
The more telling sign of the aluminium market’s state is the significant drop in physical premiums across major regions. In Japan, a key aluminium importer, negotiations for first-quarter delivery premiums suggest a decrease, reflecting lower demand and an oversupply in the market. Similar trends are observed in Europe and the United States, where physical premiums have fallen to their lowest since early 2021.
Western Market Surplus Amid Weak Demand
These falling premiums in Japan, Europe, and the U.S. suggest that the Western aluminium market is experiencing a rising surplus, primarily due to weak demand.
China’s Role in Aluminium Imports
China has emerged as a positive influence in the global aluminium market, with a significant increase in imports, especially of Russian-brand aluminium. The country’s imports include not only Russian metal but also increasing quantities from the Middle East, Malaysia, and South Africa, indicating broader market challenges in placing production in Western markets.
LME Shadow Stocks and Hidden Surplus
There’s an increase in LME shadow stocks, or off-market inventory that can be delivered into the LME system. This rise suggests a potential for more aluminium to enter the market, further indicating a surplus. The dynamics of LME warehouse storage also imply that the visible LME stocks may not fully reflect the availability in the physical market.
Conclusion: Unusual Market Dynamics
The combination of decreasing LME inventory and falling prices, along with the decline in physical premiums and the rise in shadow stocks, points to a growing surplus in the global aluminium market. These trends highlight the complexities of the aluminium market, influenced by varying regional demands, stock dynamics, and international trade factors. 
