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Short LME aluminum positions' rise outpaces longs

London — Net long liquidation positions fell on the London Metal Exchange last week, with aluminum prices trapped around $2,100/mt as investors kept taking money off the table.

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Total net long aluminum positions on the London Metal Exchange fell 4.4% to 166,179 contracts in the week ended December 1, Commitments of Traders Report data showed Tuesday.

The net long money managers' position stood at 135,941 contracts last Friday, down 5.5% on the week.

The gross long position had increased to 333,448 lots, up 2.4% on week, however, the gross short positions had outpaced them in growth and stood at 197,507 lots, up 15,846 lots or 8.7% on the week.

"Aluminum saw the spec long retreat to 5.2% of open interest or 27,000 lots, not far from the smallest long registered so far this year at 2.2% of open interest on June 26. The year-to-date peak long in aluminum is 44% of OI from early April," Marex Spectron said in a note.

The market's expectations of tight supply because of Chinese capacity cutbacks seems to have started fading as smelter cuts have been less than expected in the winter period while Chinese output kept increasing.

That led LME aluminum prices to correct over the past two weeks despite LME stocks falling to lows not hit since 2007, with live on-warrant stocks at 864,100 mt on Tuesday.

Last Thursday, the Shanxi branch of National Bureau of Statistics of China said in its October industry report that Shanxi Province in Northwest China, a key aluminum production hub, produced 820,000 mt refined aluminum in January-October, up 19.6% year on year.

Meanwhile, a Hongqiao source told S&P Global Platts at the end of November that it was unlikely to reduce smelter capacity further for winter, as it had already reached the government-required cuts when it curtailed 2.68 million mt/year of unapproved capacity in August.

The LME aluminum three-months futures contract broke below support at $2,060/mt and closed Tuesday at $2,052/mt, down around 1% on day but also down 5.5% on the month.

LME prices have also been hit by lower domestic Chinese prices.

The most active February 2018 contract on the Shanghai Futures Exchange closed at Yuan 14,620/mt on Tuesday, down Yuan 25 day on day, on a volume of 1,086,930 mt.

Rising SHFE stocks remained one of the primary reasons for the price decline. Deliverable aluminum stocks stood at 702,321 mt in SHFE warehouses Friday, up 1.1% week on week, while on-warrant inventory totaled 657,477 mt, up 1.3%.

--Vicky Bakourou,

--Edited by Jonathan Dart,