* 850,000 tonnes of aluminium tom/next traded Tuesday
* LME aluminium tom/next around $6 a tonne
By Pratima Desai
LONDON, Aug 18 (Reuters) - Barclays Capital declined on Wednesday to comment on market talk that it has a position controlling 30 to 40 percent of aluminium stock warrants in London Metal Exchange (LME) warehouses and cash contracts.
According to latest LME data there are two such long positions, each controlling between 30 and 40 percent of aluminium stock warrants and cash contracts. <LME/WC><LME/WHD>
“We hear one of them is BarCap, their trader is holding a lot of material,” a metals analyst said, adding he did not think it was for the bank’s own book. “Two million tonnes for their own book would be crazy.”
A metals industry source agreed that the position was unlikely to be for the bank’s own book.
A Barclays Capital spokesperson declined to comment on whether it was one of the two position holders. It is the investment banking arm of British bank Barclays (BARC.L).
Stocks of aluminium in LME warehouses stand at above 4.46 million tonnes. Global aluminium consumption this year is estimated at 37 million tonnes and expectations are for a surplus of about 1.2 million tonnes. [MET/POLL] <0#LME-STOCKS>
There are no clear indications as to who the other significant position holder could be. There are no rules or laws preventing such positions and the LME said it maintains an orderly market through its lending guidance for dominant positions.
Trader talk about the positions has escalated in recent days with the development of a premium or backwardation for material to be delivered tomorrow against the day after, known as a tom/next trade. <LME/MATCHED>.
“The focus of the aluminium market has been on the tightness in the nearby spreads,” Standard Bank said in a note.
The tom/next premium on Wednesday was around $6 a tonne and the volume traded was more than 12,000 lots or 300,000 tonnes of aluminium. On Tuesday the premium was about $5 a tonne, which compares with a small discount in previous months. CMALT-0
Nearly 34,000 lots or about 850,000 tonnes of aluminium changed hands in tom/next trade on Tuesday. <0#CMAL:>
Barclays Capital also declined to comment on market talk that it has been lending large amounts of aluminium to the market in recent days, using tom/next trades. <LME/MATCHED>
The borrowing, traders said, was to cover short positions, some of which have been rolled forward for September.
Worries about supplies, despite an overhang of inventory, for nearby delivery have also narrowed the contango between the cash LME aluminium contract and the three-month MAL0-3 contract to around $10 a tonne from $30 a tonne in June.
Last year, the scale of large long positions in the LME tin market caused market concern. [ID:nL7149027]
The LME has the power to step in and force long position holders to lend by imposing its ‘lending guidelines’.
“We do not comment on whether lending guidance has been invoked or not,” the LME said.
Under the guidance, if an LME member or client holds 50 percent or more of the warrants or cash today/cash positions, it should be prepared to lend at a premium that is no more than half a percent of the cash price for a day.
For more on the LME guidance, click: here (Additional reporting by Michael Taylor; editing by Anthony Barker)