Published by Global Banking & Finance Review®
Posted on September 3, 2025
3 min readLast updated: January 22, 2026
Add as preferred source on GoogleThe FCA is questioning Mercuria over its significant LME aluminium holdings, which are affecting market prices and transparency.
By Pratima Desai
LONDON (Reuters) -Britain's financial watchdog has approached commodity trader Mercuria inquiring about its large London Metal Exchange aluminium holding, which has distorted prices for contracts with short maturities, two sources familiar with the matter said.
No rules have been broken, but disruptions to the LME's largest-volume market leave consumers in the transport, packaging and construction industries without price transparency and access to physical aluminium metal.
Britain's Financial Conduct Authority and Swiss-based Mercuria declined to comment.
Mercuria has for much of the time since May held more than 90% of aluminium warrants - title documents conferring ownership. As of September 2, LME data showed its holdings of available or on warrant aluminium amounted to more than 421,000 metric tons.
Industry sources say the FCA would likely be questioning Mercuria about its aluminium position at the instigation of a bank or broker, who may have complained, or upon a referral from the LME.
The two sources familiar with the matter as well as industry sources said the FCA is expected to ask Mercuria why it is holding the metal. It will also want to know what it plans to do with it and when, since the position is influencing prices of aluminium contracts, they said.
The LME did not address Reuters questions about Mercuria or the FCA.
"As per its policy relating to position management, the LME has a number of arrangements in place to guard against any undue influence of large or dominant positions, including lending rules, daily position reporting and accountability levels," it said.
HISTORY REPEATING?
The LME has faced criticism in recent years over its handling of disruptions such as the 2022 nickel crisis when the market was suspended for more than a week after prices doubled to records above $100,000 a metric ton in just a few hours.
One company holding a large share of LME inventory suggests tight supplies and creates premiums or backwardations for short-dated contracts such as cash over the three-month aluminium currently around $6 a ton.
Typically, near-term metal contracts trade at a discount or contango to longer-dated forwards as the assumption is that higher prices for the short end of the maturity curve or a backwardation will attract metal to the exchange.
But the premium for September over the three-month contract and the October and November forwards over the three-month keep appearing even though aluminium has been delivered to the LME system.
Aluminium inventories in LME approved warehouses at 479,600 have climbed more than 40% since late June.
For many in the aluminium industry, Mercuria's position echoes history.
More than a decade ago, LME aluminium prices stopped reflecting supply and demand fundamentals due to a trading strategy involving large holdings by Sonny Mcness, then a trader at JPMorgan. JPMorgan declined to comment.
Mcness is now at Mercuria and, according to four other sources familiar with the matter, is deploying a similar approach.
Reuters was not able to contact Mcness for comment.
The 148-year old LME is owned by Hong Kong Exchanges and Clearing.
(Reporting by Pratima Desai; Editing by Veronica Brown and Joe Bavier)
The FCA has approached Mercuria to inquire about its large aluminium holdings at the LME, which have distorted prices for contracts.
The FCA is concerned because Mercuria's holdings have left consumers in various industries without price transparency and access to physical aluminium.
Since May, Mercuria has held more than 90% of aluminium warrants, which are title documents conferring ownership.
The LME has faced criticism for its handling of disruptions, such as the 2022 nickel crisis, which raised concerns about market stability.
Mercuria's current position is reminiscent of a trading strategy used by Sonny Mcness at JPMorgan, which previously distorted aluminium prices.
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