ALUMINIUM ARB INDICATOR: Wide arbitrage unviable with Section 232 tariff, US Midwest backwardation

The implementation of the Section 232 aluminium tariff and a backwardation in the US Midwest aluminium market continued to offset the advantages of a wide aluminium arbitrage in March.


The differential between cancelling aluminium from London Metal Exchange warehouses in Asia and shipping the material into the US Midwest has reached a fresh all-time high, but the market remains skeptical of profiting from the arbitrage.
"It’s a virtual arbitrage, you have to be brave to ship material now," one trader said.
For material originating from warehouses in Singapore, the estimated arbitrage was at $257 per tonne in March for shipments of 10,000 tonnes (via break bulk shipments), up from $150 per tonne the prior month, marking the second consecutive increase.
In Busan, the estimated arbitrage rose to $271.96 per tonne for shipments of 10,000 tonnes from $158.86 per tonne previously.

In Johor and Port Klang, the estimated...

Published

Justin Yang

April 04, 2018

13:42 GMT

London