The world is making more aluminium than it needs. Warehouses are stuffed with it: those registered with the London Metals Exchange hold 4.4m tonnes between them – quadruple the average amount of the past decade and enough to make about 70,000 Boeing 747s. Yet production continues at near record levels. The laws of supply and demand seem to have wandered out for a cigarette.
Enter the usual suspects. Banks (or speculators, depending on your bias) have tied up about 80 per cent of the LME-warehoused aluminium. They are buying it at spot prices and selling the promise of delivery at a future date. Because the futures curve is in steep contango (in other words, prices rise into the future) and borrowing and warehousing costs are low, this generates a solid return. But it also means there is less spot aluminium available for companies that want to make fizzy drinks cans and aircraft. So the smelters keep smelting.
There is also a plan by Credit Suisse and Glencore, the commodities supplier, to launch an aluminium-backed exchange-traded fund. That could mop up excess stock but, as with its gold-backed cousins, it is really a way to create more investor demand and support prices. Its arrival is a warning that the market is bent out of shape.