Trafigura delivers large amounts of aluminum to LME for lucrative rent deals

Companies that deliver aluminum for rent deals do not have to retain ownership of the metal, but can get a share of the rent, paid by the new owners, for as long as the metal stays in that warehouse.

The sources said Swiss-based Trafigura delivered most of the 425,575 tons to LME warehouses in Port Klang, Malaysia. Rent for storing aluminum in LME warehouses is around 55 U.S. cents per ton per day, or more than $230,000 for that amount of aluminum.

Trafigura and the LME declined to comment.

Total aluminum stocks in LME warehouses climbed 88%, or a net 424,000 metric tons, to 903,850 tons on Thursday, the highest level since January 2022.

The delivery of 425,575 tons to Port Klang drove the jump.

Two sources said most of the aluminum delivered to LME warehouses was of Indian origin and that there was potentially another 400,000 tons of aluminum waiting in Port Klang for delivery to LME warehouses.

One source said aluminum originating in Russia could be in the mix.

The LME banned from its system Russian aluminum, copper and nickel produced from April 13 to comply with new US and UK sanctions imposed over Russia’s invasion of Ukraine.

For metal produced before April 13, the LME created different categories for aluminum outside or already inside its system. It later clarified the rules, in what industry sources said was a move to stop the gaming of the Russian aluminum sanctions and LME rule changes.

Benchmark three-month aluminum prices were last down 0.6% at $2,545.5 per ton.

(By Pratima Desai and Polina Devitt; Editing by Veronica Brown and Paul Simao)