New York—CME Group's AUP Midwest premium futures again rallied across the whole curve on March 15, back to May 2019 levels, as the spot premium to a 21-month highs, as concerns around supply and inventory restocking continued.
The futures contracts trade on CME Globex and CME Clearport and settle on a monthly basis against the Platts Midwest transaction premium.
The March contract settled at 18.037 cents/lb on March 15, up 1.1 cents/lb from the March 8 close, as the spot premium rose by 1.70 cents/lb to 18.75 cents/lb during the same period.
April settled up 1.75 cents/lb to 19.50 cents/lb, with 246 lots trading during the week ended March 12.
The March/April spread continued to widen, settling at a 1.463 cent/lb contango on March 15, as inventories have continued to draw and demand has remained steady.
"The market has been supported here especially with LME spreads back in contango" a trader said.
With prices rallying further into 2021, the market is starting to see participants selling the front-month contracts and buying further dated strips in 2021 in order to capture some of the backwardation and restock inventories, which entailed started to flatten the curve.
April/July spread tightened to 0.25 cent/lb as did the May/July spread. The Q3 2021/Q1 2022 spread traded at a 2.25 cent/lb backwardation, with 140 lots trading in Q1 2022 at 17 cents/lb on March 15.
The spot-to-six months premium spread flipped back and forth from backwardation to contango over the previous week and has averaged a 0.123 cent/lb contango during that time.
The London Metal Exchange reported that off-warrant stocks increased by 51,499 mt to 1,627,928 mt in January. Off-warrant stocks in Detroit decreased by 4,253 lots to 138,986 mt. the rest of the US was unchanged at 22,362 mt.
The last commitment of traders report by the Commodity Futures Trading Commission showed that as of the March 9 close, long positioning by swap dealers increased slightly by 199 lots during the week to 13,672 lots, as spread activity declined only slightly by 47 lots to 859 lots.
The H2 2021 strip continued to rally on the back of market sentiment that the Biden administration will keep tariffs in place, sitting around 18.75 cents/lb on March 15, up another 1.35 cent/lb on the week. The Q4 2021/Cal 2022 spread sits just over a 1 cent/lb backwardation, as the market is now starting to price in that tariffs could be around for the balance of the year.
The most recent Census Bureau data, released March 5, stated that imports of unalloyed aluminum from Canada totaled 66,541 mt for the month of January, below the 77,000 mt monthly average the USTR set for September to December 2020.
US total imports of P1020 or greater were 86,935 mt in January, down 60% year over year.
"Freight inside and out of the US, market is insanely tight with other regional premiums rallying, CIF values will have to rise for the US to compete on imports," a consumer said.
The market still awaits an update from the United States Trade Representative on quotas imposed on Canadian unalloyed aluminum imports under HTS 7601.10 for 2021.
The USTR has not given any further guidance on quota amounts for 2021, keeping the Canadian supply of P1020 in the US very tight and increasing upcharges on higher purity metal such as P0610 and P0506.
