Aluminium dips on massive delivery to LME

Aluminium prices dipped on Friday after the London Metal Exchange (LME) data came in to show an 88% jump in inventory.

The most traded three-month contract for aluminium dipped to as low as $2,537 a metric ton, after inventory data was published in the morning. Loss narrowed since then and it was last trading 0.4% down at $2,552 during official rings.

Aluminium stocks in LME-approved warehouses rose by 424,000 metric tons to 903,850 tons on Thursday, the highest since January 2022. <MALSTX-TOTAL>

A 135,350 tonnes were "re-warranted" to become tradable on the exchange, which required warrants to activate metals for being bought and sold.

While increasing inventory usually means relaxed supply and could push down prices significantly, but aluminium could be an exception with traders and warehouses cultivating new means to profit from LME's post-sanction rule change on Russian metals last month.

"These delivery have little to do with fundamentals. Aluminium spreads already went to steep contango, suggesting that people were already expecting these stocks to come," said Daniel Smith with AMT.

Discount of cash against three-month aluminium contract was at $47.7 a ton, a condition known as contango usually accompanied by relaxed supply. <CMAL0-3>

For copper, eyes were on the growing gap between prices in Chicago and Shanghai that could give rise to arbitrage opportunities.

Front-month copper contract on Shanghai Futures Exchange (ShFE) has gained 15% so far this year, lagging behind a 21% rise on Chicago Mercantile Exchange.

Some are looking for ways to re-export copper stocks out of China to capture some arbitrage gains, a trader source said.

"Chinese traders have been selling imported copper, in particular brands deliverable for Comex since last week," the source added.

Benchmark three-month copper rose 1.6% to $10,062 per metric ton.

U.S. unemployment claims rose last week to the highest level in more than eight months, raising expectations for rate cuts.

A rate cut could pressure the U.S. dollar. A weaker dollar makes greenback-priced metals cheaper to holders of other currencies.

Zinc advanced 1.2% to $2,944, lead increased 0.2% to $2,237 and tin rose 0.1% to $32,625. Nickel dropped 0.7% to $18,900.