Tight, volatile spreads create uncertainty and hope for Europe's aluminium buyers

Tight and volatile spreads between nearby and forward aluminium prices on the London Metal Exchange have created uncertainty for buyers in Europe as they attempt to work out how to manage their physical purchases over the months ahead.

Ingot premiums have been mostly flat over the summer months, but there has been volatility on both LME aluminium prices, which have risen sharply to their highest price since February last year, and the aluminium spreads, which swung to near backwardation on the tom/next and cash-to-three-month spreads ahead of the August prompt date. The cash-to-three-months aluminium spread has remained volatile following the August 20 prompt date, ranging between a zero and $18-per-tonne contango, from a contango of about $45 per tonne for much of the first half, in a market where nearby cheap warrants are not available. It has led some sellers in Europe to discount premiums slightly for deals for delivery in September that have been signed in recent weeks. “I sold a clip to a trader last week and had to adjust for September pricing,” a producer said,...


Jethro Wookey

September 02, 2014

17:00 GMT