Aluminium delivery delays on LME surge post-Trafigura's record May shipment

The London Metal Exchange (LME) has experienced a dramatic surge in the wait time for aluminium deliveries, which has surged from zero to over five months following a significant influx of metal from Trafigura Group in May.

Recent exchange data reveals that as of the end of May, the waiting period for aluminium at Istim Metals' warehouses in Port Klang, Malaysia, has extended to 159 days. This is a stark contrast to April when there was no queue. This development underscores the impact of substantial deliveries on the logistical dynamics within the LME.

The recent queue at the Istim warehouses in Port Klang, Malaysia, marks the longest wait in the LME system since June 2021, when a 168-day delay occurred. This queue followed a substantial delivery last month, triggering a flurry of metal requests. According to reports from Bloomberg, Trafigura orchestrated the delivery. At the same time, various financial entities, including Squarepoint Capital LLP, Citigroup Inc., and JPMorgan Chase & Co., procured the aluminium and swiftly issued orders for its release.

Lengthy queues have become a recurring issue within the LME aluminium market, sparking debates among buyers and posing challenges for the exchange itself. A decade ago, the strategic manoeuvres employed by traders, banks, and warehouses to extend queues and maximise profits faced criticism from US regulators and consumers. In response, the exchange implemented regulations to curb such practices.

The LME has made it clear that its rules are designed to discourage the deliberate elongation of queues as a business strategy. One notable rule prevents warehouses from earning rent on metal held in queues for more than 80 days, demonstrating the exchange's commitment to maintaining a fair and efficient market.