Aluminum Fleeing LME Warehouses Rapidly

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Aluminum is exiting warehouses tracked by the London Metal Exchange at the fastest pace in a decade, leaving investors with less information about the market and possibly more volatility.

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Banks and traders are moving metal to cheaper facilities outside the LME network, a tactic to save money as profits from one of the most common trading strategies shrinks, analysts at Jefferies Group LLC and INTL FCStone Inc. told Bloomberg News.

About two-thirds of the metal exiting LME depots this year ended up in warehouses not monitored by an exchange, Macquarie Group Ltd. estimates.

Storing aluminum to make money from the spread between short- and long-term contracts has limited supplies for consumers, helping boost premiums to obtain the metal to a record high, according to Macquarie.

On Tuesday, December 9, the day’s biggest mover was the aluminum cash price, which saw a 2.1% decline on the LME to $1,960 per metric ton. The cash price of primary Indian aluminum fell 1.2% to INR 121.75 ($1.97) per kilogram. The 3-month price of aluminum closed at $1,973 per metric ton. Following a couple days of improvement, prices fell by 1.2% on the LME.

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Chinese aluminum prices were mixed for the day. The price of Chinese aluminum scrap increased 1.6% to CNY 12,800 ($2,073) per metric ton. Chinese aluminum billet saw its price drop 0.1% to a 30-day low of CNY 13,360 ($2,164) per metric ton yesterday. The Chinese aluminum cash price weakened by 0.1%, settling at CNY 13,360 ($2,164) per metric ton. The price of Chinese aluminum bar fell 0.1% to CNY 14,350 ($2,324) per metric ton.

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