MI aluminium stocks analysis: US inflow

Thursday brought heavy warranting activity at LME warehouses in Baltimore in what marked a significant shift of inflow from Asian locations.

Baltimore started the year with 76,850t of registered stocks and then saw a rapid build to 113,325t by the end of February. Indeed, it was one of the drivers of the overall build in LME stocks that was a key feature of the first part of 2006.

After that, though, the activity was all one-way, registered tonnage falling to 61,500t at the end of November. Draws have become a lot more sporadic in recent months and nothing has moved “out” since the start of December.

That ties in with reports that spot demand has slackened appreciably in the US with consumers well covered through the end of the year and physical premiums weakening accordingly. There has also been some usual pre-end-year de-stocking and we suspect that this has now spread to the LME system.

Note also the "reverse" cancellation of the tonnage at Chicago. This material-all the registered tonnage here—has been sitting in the cancelled category untouched since July.

The US action eclipsed still robust draw rates, which are still reflecting the wholesale movement of metal at Singapore. However, the net movement of metal back into the open tonnage category has reduced further an already low-looking ratio of cancelled tonnage to 3.7%. That suggests very subdued activity once the tranche at Singapore has moved.

Meanwhile, stocks registered with the Shanghai Futures Exchange recorded a net 493t decline to 18,333t in the week to Thursday. That leaves the headline figure close to the year's low of 16,354t recorded in the week to Sep 28.