Squarepoint follows Citi buying Russian aluminum on the LME

Bloomberg News |October 13, 2023 | 10:02 am Intelligence Russia and Central Asia Aluminum 

Stack of raw aluminum ingot in cargo port. (Stock image)

Hedge fund Squarepoint Capital LLP has in the past month bought more than $100 million of largely Russian aluminum from the London Metal Exchange, the latest example of financial firms buying up metals as weak demand creates a build-up of stocks.

The fund — which is best known for its quantitative approach to trading — requested delivery of about 50,000 tons of aluminum stored in LME warehouses in South Korea, according to people familiar with the matter, who asked not to be identified because the dealings are private. Most of the metal was made by United Co. Rusal International PJSC before being delivered onto the exchange, the people said.

Aluminum prices have dropped 7.6% on the LME this year as a broad downturn in construction and industrial sectors hit demand while supply increased. Financial players tend to buy with a view that aluminum prices could move higher, or that rising inventories will make financing and warehousing deals more attractive should the market remain weak.

Bloomberg reported earlier this week that Citigroup Inc. has been buying large volumes of physical aluminum and zinc on the LME in a metal-financing play, in which traders buy up surplus supplies at depressed spot prices and look to lock in a profit against higher priced futures.

The Squarepoint and Citi deals show a growing willingness among financial players to handle the large volumes of Russian material that flowed into LME warehouses since the invasion of Ukraine.

There are no blanket prohibitions on trading Russian aluminum, and the LME last year decided against a broad ban on Russian metal inflows. However, some consumers have been seeking to avoid Russian metal, prompting warnings that unwanted supplies piling up on the LME would cause the benchmark price to dislocate from the rest of the market.

The latest data from the LME showed the share of Russian supplies in total live aluminum inventories on the exchange dropped to 76% in September, from 81% a month earlier.

(By Archie Hunter, Alfred Cang and Mark Burton)