EXPERT VIEW: The backs are back in aluminium - for now

The benchmark cash/three-month spread in aluminium at the start of this week hit backwardation levels not seen since before the Global Financial Crisis, which is a landmark event but not necessarily a signal of a major shift in market dynamics.

It is most probably a short-term aberration caused by the potent combination of February date shorts clashing with dominant longs but given added spice and turbulence by shifts in aluminium inventory levels on the London Metal Exchange. But, looking further ahead, some of those daily inventory shifts - those displayed in the “arrival” columns - are perhaps a cause for further study of the LME rules covering warehouse stock operations. Specifically, deliveries out are governed by rafts of stipulations on daily load-out rates - in essence, they are down to logistics and are a known unknown. On the other side of the equation, arrivals are much less covered by regulations and logistics are not really a factor when metal appears in the figures - making them an unknown unknown, maybe? So what has happened over the last week or so? First, the cash/threes backwardation traded at $50 per tonne on Monday February 19...


Martin Hayes

February 23, 2018

17:42 GMT