US Aluminum Futures Curve Continues to Straighten on Freight Costs

Strong points

The AUP’s total volume totaled 2,023 lots, or 50,575 mt, for the week ended June 4. Open interest ended the week at 22,690 lots, up 319 lots from the May expiration, which lost 3,479 lots.

The six-month spot spread stood at a slippage of 4.65 cents / lb on June 7.

The cash / three-month spread on the LME stood at a contango of $ 5.24 / mt.

The cash / December spread stood at a carry forward of $ 14.24 / mt.

The net speculative long positioning on the LME plunged to 21% of the OI at the close of June 3: Marex.

CME Group’s AUP Midwest premium aluminum futures continued their rally in the week ending June 7 as the entire curve was up with positions carried over to H1 2022, pushing prices higher more long time due to rising freight cost and high demand.

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Futures contracts trade on CME Globex and CME Clearport and are settled monthly based on the S&P Global Platts Midwest transaction premium.

As labor and scrap markets remain tight, increased demand for P1020 and aluminum slab has come from factories unable to secure scrap requirements for May.

“No sagging anytime soon,” said one consumer.

Platts’ U.S. Midwestern premium hit an all-time high of 27.40 cents / pound on June 7. By removing the import duty of 11.965 cents / lb as of June 7, the premium for the US Midwest is still lower than 2015 levels, when the LME’s storage queues were extended. Market sources have said replacement costs are now increasing by 30 cents / pound.

The June contract rose 1.40 cents / pound over the past two weeks to 27.10 cents / pound on June 7.

The June / July spread tightened significantly to reach a 1.57 cents / pound swing as stocks continued to benefit from sustained demand and traders continued to try to restock, particularly in Toledo, New York and Baltimore.

“The market continues to rise because of the logistics,” said one trader.

As the offset continues, market players are still actively selling first month contracts and buying new installments dated 2021 to capture some of the offsets and replenish inventory.

The July / October spread also fell more sharply on June 7, reaching 2.78 cents / lb. Some long positions were carried over to the second half of 2021 and to the first quarter of 2022, as new buys occurred across the curve. The Q3 / Q4 spread also narrowed, settling at a 2.20 cents / pound offset, with T3 trading at 25.35 cents / pound and Q4 at 22.50 cents / pound on CME. Clearport during the week ended June 7.

The July contract traded on 535 lots during the week ended June 7, with the contract trading up to 26.25 cents / pound, or 1.75 cents / pound higher on the week.

The fourth-quarter band continued its recent rally gains, increasing another 1.50 cent / pound to 22.50 cents / pound, as activity was also seen in the first half of 2022 at slightly higher levels, the first quarter 2022 trading at 20 cents / pound and second quarter 2022 trading at 19.15 cents / pound. Q4 2021 / Q1 2022 eased to around 2.50 cents / lb as the market began to forecast some relief in freight costs and some increase in import flows, but at higher levels than the previous week.

The six-month spot premium spread continued to lag from the previous week and averaged 4.542 cents / lb during this period.

The latest Commitment of Traders report from the Commodity Futures Trading Commission showed that at the close on June 1, the long positioning of swap brokers increased by 360 lots during the week to 13,381 lots, while spread activity increased by four lots to 945 lots. Short positions in the managed currency increased from 134 lots to 1,142 lots.

The U.S. Department of Commerce officially set June 28 as the start date for the proposed aluminum import monitoring and analysis system and clarified some licensing requirements for the program.

The US trade representative gave no further guidance on the quota amounts for 2021, keeping the Canadian supply of P1020 in the US restricted and increasing the additional charges on higher purity metals such as P0610 and P0506. .

The US Census Bureau is expected to release April import data on June 8.

Even though Canada has shifted much of its primary aluminum production to value-added products, the market continues to run out as the US 6063 spot billet premium hit 22 cents / pound. April 15 and has stayed there ever since.

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