Aluminum Withdrawal Orders on LME Surge in Longest Run in a Year

Updated on
  • Prices rise as canceled warrants climb for third day on LME
  • Metals mixed after on private China PMI indicates contraction

Orders to remove aluminum from warehouses tracked by the biggest metals exchange rose for a third day, the longest stretch in more than a year, prompting traders to close out bearish bets on prices that are near a six-year low.

Canceled warrants, as the bookings are known, surged 21 percent in the past three days to 1.1 million metric tons, the highest in five weeks, London Metal Exchange data show. While the market is in surplus, the bookings are probably a sign that supplies are tightening and have spurred traders to cover positions on further price declines, according to ICBC Standard Bank Plc.

"It’s unlikely to be related to real demand," Leon Westgate, an analyst at ICBC Standard Bank in London, said by phone. "With the large tonnages like that, it’s likely to be finance-related. It’s likely to be material moving to an ex-LME location."

Aluminum slumped to the lowest since 2009 last week. The metal has dropped about 19 percent this year as slowing economic growth in China, the biggest user, cut demand. Industrial metals were mixed on the LME on Monday as a private gauge of the nation’s manufacturing industry indicated contraction in October, while beating estimates.

Aluminum for delivery in three months rose for a second day, adding 1 percent to settle at $1,493 a ton at 5:51 p.m. on the LME. Prices reached $1,460 on Oct. 28, the lowest since June 2009.

About 36 percent of total aluminum stockpiles are earmarked for delivery on the LME, with one unidentified company holding as much as 49 percent of the rest, according to bourse data as of Oct. 29. Bookings at the Dutch city of Vlissingen surged by more than 200,000 tons in the past three days.

Withdrawal orders surge

Aluminum production will exceed demand by 1.13 million tons this year and by 832,000 tons next year, according to ICBC Standard Bank.

Copper on the LME gained 0.3 percent a ton, after falling to the lowest in a month. The metal is down 19 percent this year because of waning demand in top buyer China. Zinc and tin also declined in London, while nickel and lead gained. Copper futures for December delivery added 0.1 percent to $2.319 a pound on the Comex in New York.