Trafigura Builds Large LME Aluminum Position as Stocks Hit 36-Year Low, Fueling Historic Squeeze

Trafigura has built large long positions in London Metal Exchange (LME) aluminum futures, becoming a key participant in a historic market squeeze as LME inventories fall to their lowest level since 1990. According to Sina Finance, people familiar with the matter said Trafigura recently bought large volumes of LME aluminum contracts mainly to obtain physical metal. LME data show that several large long positions are concentrated in nearby aluminum contracts ahead of the November benchmark contract’s expiration next Wednesday, November 18. Their combined size exceeds the exchange’s entire current aluminum inventory of 226,350 tonnes, although the positions are not historically large in absolute terms. The inventory level is the lowest since 1990. The combination of large nearby positions and falling inventories has driven one of the most severe physical supply squeezes in decades, with spot and nearby contract prices well above deferred futures. The spread between the contracts eased slightly on Thursday but remained at a historic high. The LME said it has mechanisms to prevent large or dominant positions from unduly affecting the market. It regularly requests more detailed position-management information from market participants and can require traders to take appropriate steps to manage their positions. A Trafigura spokesperson declined to comment on the company’s aluminum-market positions.