The more conservative approach that some market participants are adopting involves holding less inventory to limit their exposure to heavy carrying costs during the expected backwardations next year.
They expect premiums next year to be unpredictable, with record-low aluminium stocks likely to cause intermittent backwardations throughout the year.
As a result, market participants told Fastmarkets during the recent LME Week and at the Dusseldorf aluminium trade show that they will take a more conservative approach in the coming months.
A backwardation has participants trying to sell metal in the spot market, which is helping to reduce premiums in Europe. The benchmark cash/three-month spread swung to a $1 per tonne backwardation on the afternoon of Monday October 15. And the benchmark P1020 Rotterdam in-warehouse premium
fell to $70-80 per tonne on October 12 from $75-80 per tonne the day before.
“That’s what we...