Back To The Drawing Board. Again. May 3rd, 2019 by John Gross

Last week was a tough one for metals.

It started on Monday when 36,325 mt of copper, and 48,200 mt of aluminum was ‘delivered’ into LME warehouses.

To put this into perspective, this equates to 80.1 million pounds of copper, and 106.3 million pounds of aluminum. For the full week, 229,375 mt, or 505,684,713 pounds of aluminum ‘arrived’ in warehouses.

Even the most learned amongst us has difficulty comprehending how this can occur in a logical, and well ordered world.

Of course this metal did not just magically appear overnight, so why treat it as if it did?

Global consumption of refined copper is approximately 24 million mt, and aluminum is about 60 million mt.

Thousands of companies, and perhaps millions of people throughout the world, working for mining, smelting and refining organizations; primary consumers; manufacturers, and their customers, and customers of theirs farther down the line; along with merchants, brokers and distributers, as well as the local plumber and electrician are all affected.

This is not to say the increase in inventories alone caused copper to fall 15¢ last week, or knocked a few cents off aluminum, but it sure as heck wasn’t a stabilizing factor either.

Regrettably, we are watching the ‘tail wag the dog’, when markets lack critically important transparency.

There is no problem with metal moving into or out of warehouses, the issue is how the information is disseminated.

The other way of saying this is, no one likes surprises.

The London Metal Exchange is reviewing potential warehouse rule changes, and is seeking market wide feedback.

If you feel the issue of inventory transparency is important to your business, we urge you to contact the LME and voice your opinion.

Regards,
John

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