Squarepoint Capital LLP, a hedge fund, has recently acquired primarily Russian aluminium from the London Metal Exchange (LME), totalling over $100 million in value. The metal is currently stored in South Korean warehouses, and Squarepoint Capital has expressed its intention to take delivery of 50,000 tonnes of this aluminium. A significant portion of this aluminium originated from United Co. Rusal International PJSC before it debuted on the exchange.
This strategic move by Squarepoint Capital coincides with a period of sluggish demand in the aluminium market, resulting in an accumulation of aluminium stocks and a 7.6 per cent decrease in aluminium prices on the LME this year.
The downturn in the construction and industrial sectors plays a major role in this decline. In response to the market conditions, financial institutions like Squarepoint Capital are proactively securing substantial metal holdings, expecting potential price increases or profitable opportunities in financing and warehousing deals in a fragile market.
Citigroup Inc. is another financial institution employing a similar approach, amassing substantial quantities of physical aluminium and zinc from the LME. Their strategy revolves around capitalizing on the current low spot prices compared to anticipated higher future prices. By acquiring these metals at favourable rates now, they can reap benefits from any future market recovery.
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