Trafigura tags large LME aluminium volumes for delivery

By Pratima Desai

LONDON, May 18 (Reuters) - Commodity trader Trafigura has earmarked for delivery unusually large volumes of aluminium at London Metal Exchange (LME) approved warehouses in Malaysia, two sources with direct knowledge of the matter said, raising exchange supply concerns.

Swiss-based Trafigura recently cancelled warrants -- title documents that confer ownership -- totalling more than 132,000 tonnes of aluminium at LME warehouses in Port Klang, Malaysia, the sources said, more than 20% of available LME stocks.

Cancelling warrants indicates intention to take delivery of metal from LME warehouses.

Trafigura declined to comment.

Aluminium stocks in LME warehouses hit two-month highs of 573,075 tonnes in the middle of April, easing worries about availability of the metal in the LME system and weighing on prices which are down 15% since January.

Benchmark aluminium prices at $2,270 a tonne have also been under pressure from worries about growth and rising demand for the metal.

However, the cancellation of large amounts of aluminium warrants this week fuelled concern about LME supplies and influenced price differentials between contracts along the maturity curve, industry sources said.

The discount or contango for buying aluminium tomorrow and selling it the day after - known as tom-next -- flipped into a premium or backwardation, which hit $11 a tonne this week. It hit a session high of $8 a tonne on Thursday.

Further along the maturity curve a $5 a tonne discount on Tuesday for the cash over the three-month aluminium contracts reversed into a premium, touching $14 a tonne, the highest since October last year.

"As per normal procedure, the LME Market Surveillance team has been carefully monitoring the aluminium market and engaging with all parties involved to ensure market orderliness and conduct are maintained," the LME said in response to a request for comment.

Focus in the LME aluminium market this week was also on a short aluminium futures position with 20-29% of open interest - the number of outstanding contracts due to mature or be rolled over at settlement on May 17.

Latest LME data shows three short aluminium positions maturing in June. One holding 10-19% of open interest and two others with 5-9%.

Also attracting attention was a long aluminium position held by IXM owned by China's CMOC Group, with large amounts of LME aluminium warrants and nearby contracts <0#LME-WHC>, a third source with direct knowledge of the matter said.

IXM declined to comment. (Reporting by Pratima Desai; additional reporting by Eric Onstad and Polina Devitt; editing by Elaine Hardcastle)