Stocks of aluminium held by the world's big three exchanges—London Metal Exchange (LME), NYMEX and the Shanghai Futures Exchange (SHFE)—fell by 21,239t in November, reversing a 6,618t build in October.
All three exchanges saw registered tonnage decline last month led by the SHFE (down 14,261t), followed by a 4,578t decline in NYMEX-warranted stocks and a small net 2,400t decline in LME stocks.
European Squeeze
The fall in LME stocks, which still leaves the headline figure showing a year-to-date increase of 34,950t, is slightly misleading because it masks very divergent geographical trends.
As the chart shows, there is an ongoing squeeze on tonnage registered at European locations, which is hardly surprising given rocketing local premiums and a physical market that is reported to be extremely short of prompt material.
Within Europe, the biggest draws came in Sweden, where LME-registered stocks fell by 13,275t last month in what marked an acceleration from October's decline of 8,450t. Arrivals at either Gothenburg or Helsingborg have been conspicuous by their absence—the last were back in August.
What's equally significant is that of the total 31,850t registered tonnage in the country at the end of the month, 4,875t were in the cancelled category. That's equivalent to 15.3% of total registered tonnage—a ratio that's way higher than the 3.6% across the system as a whole.
LME stocks in the UK continued their long-running downtrend last month to the tune of 1,350t, leaving just 2,775t. Of this 875t are in the cancelled category and registered stocks show every sign of running down to zero in the next month or so.
In Italy Trieste holds all the registered tonnage and stocks here fell by 1,425t in November to 24,525t. This metal seemed to be locked up for much of the year after being put on to LME warrant in February and March and draws only started at the end of October. However, the 1,850t sitting in the cancelled category at the end of the month suggest more departures over the course of December.
Other European locations saw cumulative LME stocks fall by 6,450t last month to 55,800t and here again a cancelled ratio of 11.5% at the end of the month is indicative of further pressure to come in the days ahead.
Asian Build
With registered stocks falling all across Europe, the check on the overall downtrend came at Asian locations, which recorded a 20,600t build last month. It was the fourth monthly increase and leaves regional tonnage accounting for 73.8% of all the stocks in the LME system.
A good part of stocks movement in the region, particularly that to South Korea, seems to reflect a circular movement from and then back to China, with local players capitalising on previous Chinese tax rebates.
Chinese exports of primary aluminium fell by 27% in the first 10 months of this but not those to South Korea, which rose by 13% to 438,770t. Imports from South Korea, or maybe that should be "re-imports", were 106,487t over the same period of time.
The recent clamp-down on exports of metal from China—the export tariff has just been hiked to 15%--may well put a big dampener on this two-way flow of metal, although right now very low cancelled tonnage at the end of the month—just 1.1% of total registered tonnage—suggests LME stocks in the Asian region are going to keep rising.
That said, there is a flip side to continued exports from China, which is falling local exchange inventories. SHFE stocks at the end of November were 21,273t, down 14,261t from the end of October and down by 25,209t on the end of 2005.
They were lower still at times over the course of November but as a month-end total, we have to go back a long time—June 2003—to find them as low.
US Quiet
Activity at LME locations in the US—just about all the registered metal is in Baltimore—was again subdued last
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