Aluminum prices fell 1.3% to $2,450 a ton on the London Metal Exchange (LME) after a massive jump in exchange inventories and growing investor caution following Moody’s downgrade of U.S. debt.
Available aluminum stockpiles in LME warehouses surged by 92,950 tons to 343,025 tons, the largest increase in over a year. Much of the rise came from re-warranting—metal initially set for withdrawal in Malaysia was placed back under LME storage. These moves often happen when price shifts expose traders to losses, making it more appealing to store metal rather than sell at a loss.
The LME’s May aluminum contract has been in backwardation, with prices for near-term delivery higher than for later months. With contracts expiring Wednesday, many traders likely delivered metal instead of rolling contracts forward at a loss.
Mercuria Energy Group reportedly built a large long position in short-term contracts, betting that any easing of sanctions on Russia could tighten supply further.
In other metals, nickel inventories rose by 8,166 tons to 183,420 tons, the biggest rise since 2021, largely due to new deliveries into Asian warehouses.
Investor sentiment was broadly negative across commodities after mixed Chinese economic data. While GDP figures beat expectations, China’s property sector remained weak and consumer spending disappointed.
Adding to pressure, China’s aluminum output hit a record high last month as lower production costs boosted smelter activity.
Moody’s U.S. debt downgrade also weighed on global markets, citing rising risks from trade tensions and unfunded fiscal policy tied to former President Donald Trump’s economic legacy.Other LME metals were mixed: copper rose 0.8%, while zinc fell 0.6%.