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In just one day, LME warehouse aluminum stocks increased by 18%, persuading some that Russia has begun offloading metal onto the exchange. AEGIS notes that Russia’s ability to deliver large volumes to the LME could be bearish to prices. Producers such as Rusal normally do not sell directly onto the LME; however, they could begin doing so if they establish a sizable short position. The LME does not publish data on the origin of deliveries; however, one trader noted that 23,525 mt of Monday’s deliveries went to a South Korean warehouse, a supposed regular delivery point for Russian aluminum. Earlier this month the LME launched a discussion paper outlining possible actions against Russia, including an outright ban on its metals. These possible actions stem from Russia’s ongoing conflict with Ukraine. According to that discussion paper, approximately 18% of aluminum in LME warehouses is of Russian origin. |
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Aluminum prices finished down over 2% yesterday after this news broke, and are down another 1% this morning, with last trade at $2,216.50/mt (7:00 AM SCST). Prices could remain under pressure if the LME takes no action against Rusal and allows deliveries to the exchange to continue unimpeded. Aluminum producers that are concerned about decreasing prices might consider hedges that provide downside protection, such as selling swaps or buying put options. Such positions are standard for producer hedging; however, they can result in opportunity costs or cash costs if metal prices increase. Please contact AEGIS for specific strategies that fit your operations. (10/18/2022) |
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Note: Clients with AEGIS Platform access can see this and other research, plus hedge portfolio reporting and tools here. |
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AEGIS Insights |
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10/05/2022: AEGIS Factor Matrices: Most important variables affecting metals prices 10/05/2022: European Aluminum Smelters Might Have Negative Margins Through 2023 8/31/2022: Will Chilean Production Issues Drive Copper Prices Higher? 8/24/2022: Chinese Aluminum Supply Issues Could Rally Prices |
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10/17/2022: Aluminium price drops on jump in LME stocks and Russian metal 10/16/2022: Codelco offers 2023 European copper premiums at record high -sources
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Important Disclosure: Indicative prices are provided for information purposes only, and do not represent a commitment from AEGIS Hedging Solutions LLC ("Aegis") to assist any client to transact at those prices, or at any price, in the future. Aegis makes no guarantee to the accuracy or completeness of such information. Aegis and/or its trading principals do not offer a trading program to clients, nor do they propose guiding or directing a commodity interest account for any client based on any such trading program. Certain information in this presentation may constitute forward-looking statements, which can be identified by the use of forward-looking terminology such as “edge,” “advantage,” “opportunity,” “believe” or other variations thereon or comparable terminology. Such statements are not guarantees of future performance or activities.
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