Aluminum Inventories Hit a Record Low and Bears Didn’t Blink

(Bloomberg) -- Aluminum available for withdrawal in London Metal Exchange warehouses plunged to a record low, but the latest sign of supply shortages still isn’t enough to shake the bearish mood dominating metals markets as the demand outlook deteriorates.

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On-warrant aluminum inventories dropped 9.7% to 260,275 tons, surpassing a previous low set in 2000, to hit a record in data going back to 1997. Stockpiles have slumped 63% this year, heading for a record annual decline, with robust demand and a slew of smelter curtailments pushing the market into a deepening deficit.

Despite the shrinking stocks, the aluminum price wiped out earlier gains after the inventory data, signaling that the focus of attention remains squarely on the risks to demand.

The mood in metals markets has shifted dramatically in the past few weeks, with worries about the persisting tight supply giving way to concerns about the state of the global economy and that Covid lockdowns will hit demand in top consumer China. Aluminum has plunged 33% from a record high in March, wiping out its gains for the year in the process.

“The rally in aluminum was relentless, and now we’re seeing a pretty strong correction,” Geordie Wilkes, head of research at Sucden Financial Ltd., said by phone from London. “The demand outlook is pretty weak across the globe, but the supply risk is still very evident.”

Aluminum futures traded little changed at $2,739 a ton on Friday, erasing an earlier gain of 2.3%. Other metals also moved lower, with tin dropping 1.3% and nickel 1.2%.

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