JPMORGAN CHASE Sources at commodity trading houses, warehouses, producers, brokers and banks say recently one such position holder is U.S. bank JPMorgan. Other companies have done so in past. JPMorgan declined to comment.
While no rules have been broken, holding a large, sometimes dominant position can to an extent have an influence on prices in the short term for contracts that will soon reach maturity.
The LME said it "would seek additional information from market participants regarding activity that raises concern".
"If a breach of the LME's rules is deemed to have occurred, we would take appropriate action."
The positions have typically meant a backwardation or premium for the nearby contract, suggesting tight supplies.
But aluminium is oversupplied and inventories are massive, which mean the natural state of the market should be contango or discount.
It also means holders of short positions, which could be bets on lower prices or hedges for physical holdings, have had to pay more to roll over their positions.
For some months now there have been large holdings of aluminium warrants, which are a claim to metal stored in warehouses approved by the LME. Currently there is a dominant position holding 50-79 percent of warrants. <0#LME-WHC>
One consequence of this is the premium for the cash contract
Following are some details of large open interest holdings since April 2014 gathered from industry sources.
FEBRUARY 2016 CONTRACT
One company held 20-29 percent of open interest on February 10, between 403,000 and 584,000 tonnes. Prices on that day value the holding at $596-$864 million.
A $5 contango for the February vs March contract became a backwardation of $8 on Feb. 15, 2 days before expiry.
JANUARY 2016 CONTRACT
One company held 20-29 percent of open interest on Jan. 18, between 238,000 and 346,000 tonnes or $350-$508 million.
A $5 contango for the January versus February contract turned into a $8 backwardation on Jan. 19, one day before expiry.
DECEMBER 2015 CONTRACT
One company held 20-29 percent of open interest on December 14, between 230,000 and 333,000 tonnes or $352-$493 million.
A $7 discount for the December versus the January contract became a $31 a tonne premium on Dec. 15, one day before expiry.
APRIL 2015 CONTRACT
One company held 30-39 percent of open interest on April 8, between 748,000 and 972,000 tonnes or $1.3-$1.7 billion.
A $5 discount for the April versus the May contract turned into a $22 backwardation on April 13, two days before expiry
NOVEMBER 2014 CONTRACT
One company held more than 40 percent of open interest on Nov. 11, more than 1.223 million tonnes or a minimum of $2.5 billion.
A $10 contango for the November versus the December contract became a $21 premium on Nov. 18, one day before expiry.
AUGUST 2014 CONTRACT
One company held 20-29 percent of open interest from Aug. 18, between 224,000-325,000 tonnes or $450-$650 million.
A $10 discount for the August vs the September contract became a $16 premium on Aug. 18, two days before expiry.
APRIL 2014 CONTRACT
One company held more than 40 percent of the open interest on April 9, more than 920,000 tonnes of metal or $1.7 billion.
A $15 discount for the April versus the May contract became a premium of $14 a tonne on April 15, the day before expiry.
(Reporting by Pratima Desai; additional reporting Melanie Burton, Eric Onstad and Josephine Mason; editing by David Evans)
