Aluminium market watchers were baffled on Wednesday after an unknown buyer made a large number of trades on the Shanghai Futures Exchange, setting off an immediate rally at the London Metal Exchange.
According to reporting by Bloomberg, 68,430 contracts for October delivery were traded on the Exchange on Wednesday evening (Shanghai) over the course of half an hour. The orders placed in Shanghai triggered a significant number of buy orders on the London Metal Exchange as a result, helping to propel prices on the exchange to a three-month high.
As of 5:50 P.M. in London, the three-month delivery price for aluminium was US$2,106 per metric ton, up 3.3 percent, but down slightly from the day’s high of US$2,117.50. The dramatic rise also drove shares of Alcoa up as well, simultaneously with a half-hour trading block between 9 P.M and 9:30 P.M. Shanghai time that saw trades of 3,130 lots.
BMO Capital Markets’ head of base and metals trading Tai Wong told industry media that Shanghai’s traders “were aggressive buyers of aluminum and nickel.”
“Why they drove aluminum $80 higher remains something of a mystery.”
The mysterious trades come as Beijing begins to ratchet down on aluminium and alumina production from domestic producers. Earlier this month the closing of dozens of metric tons per annum of alumina refining production was announced by local governments in China’s industry-heavy northeast. The central government also affirmed that mandatory seasonal production cuts would again be imposed upon aluminium smelters in an effort at combating winter air quality problems.