Mercuria Energy Group has reduced its massive aluminum position on the London Metal Exchange (LME), easing months of market tension and scrutiny from regulators, according to sources familiar with the matter.
Earlier this year, the energy and commodities trader accumulated a dominant share of aluminum inventories, at one point holding more than 80% of available LME stocks. The move was partly driven by expectations that a peace deal in Ukraine could trigger a rollback of sanctions on Russian metals, boosting demand for Russian-origin aluminum.
In recent weeks, however, Mercuria has relinquished most of its position, releasing large volumes of Russian metal while shifting toward non-Russian inventories, notably Indian aluminum. Exchange data shows that as of late August, the LME’s aluminum stocks included 228,000 tons of Russian origin and 241,000 tons of Indian origin.
With Mercuria’s retreat, its holdings have fallen below the threshold requiring disclosure. Rival trader Trafigura Group has since emerged as the dominant holder of LME aluminum inventories.
The scale of Mercuria’s earlier trade—combined with an unusually large long position in LME monthly contracts—sparked fears of a market squeeze and led the LME to tighten rules to curb outsized positions. Spot prices have since softened against futures, with the key cash-to-three-month spread slipping into contango, a sign that supply pressures are easing.
Still, many traders see the long-term outlook for aluminum as bullish, with Chinese output nearing its government-imposed capacity cap. Mercuria’s cancellation of about 100,000 tons of Indian aluminum at Port Klang in September suggests it remains active in meeting physical demand despite scaling back its exchange exposure.
Neither Mercuria, Trafigura, nor the LME commented on the developments.
