Reuters Column: London Metal Exchange’s twilight zone absorbs stocks build

LONDON (Reuters) by Andy Home – London Metal Exchange (LME) stocks of aluminium fell by 132,500 tonnes over the course of 2020. This is a surprising outcome, given the size of the COVID-19 hit to global manufacturing activity. The last time metals demand suffered a similar collapse was during the Global Financial Crisis of 2009, when LME aluminium stocks almost doubled to 4.6 million tonnes. That, however, was a credit crisis. The COVID-19 crisis isn’t. There has been no pressing need for the physical supply chain to deliver unsold metal to the market of last resort. Rather, surplus metal is being stored in the off-exchange statistical shadows. Happily, we now get to see some of it thanks to the LME’s “off-warrant” stocks reporting initiative. The amount of aluminium sitting in this LME twilight zone grew by 829,000 tonnes between February and November, by which stage shadow inventory of 1.66 million tonnes exceeded visible exchange stocks of 1.37 million. Total LME aluminium stocks, registered and shadow, surged by 1.12 million tonnes over the same period, which seems a more accurate inventory reflection of last year’s turmoil. The inventory picture is still far from complete. There is undoubtedly much more metal sitting… continue reading

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