CME Group's AUP Midwest aluminum premium futures contracts rose slightly during the week ended April 5, as the second half of 2021 firmed week on week as consumers look to try and secure tons for the balance of the year.
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 monthly average finished the month at 18.883 cents/lb, up 3.323 cents/lb from February, the largest month-on-month increase since August 2020.
April settled at 21.50 cents/lb, down 0.25 cent/lb on the week ended April 5.
The May contract settled unchanged on the week at 21.50 cents/lb.
The May/June spread tighten flipped to a 0.25 cent/lb backwardation on April 5, as inventories have continued to draw on steady demand and traders look to restock.
"We are still having to pay MW plus 0.50 cent/lb to 0.75 cent/lb for May delivery," a consumer said.
With prices continuing to hold further into 2021, market participants are still active selling the front-month contracts and buying further dated strips in 2021 in order to capture some of the backwardations and restock inventories.
The April/July spread loosened to 0.536 cent/lb as did the May/July spread, some light selling was seen in Q3. The Q2/Q3 spread loosened as well trading around 0.50 cent/lb backwardation, as the Q3 strip traded 20.60 cents/lb on both CME Cleaport and parts of H2 2021 trading 20.50 cents/lb during the holiday week.
"Logistics have gone way up, freights have gotten so high," a trader said.
AUP total volume was 232 lots or 5,800 mt during the holiday-shortened week ended April 1. Open interest finished the week at 26,522 lots on April 1, up 157 lots from the March 26 close.The spot to six-months spread settled at a 0.672 cent/lb backwardation on April 1Cash/three-month spread on the LME settled at a $22/mt contangoCash/December settled at a $41.74/mt contangoThe spot-to-six months premium spread held its backwardation over the previous week and has averaged a 0.834 cent/lb during that time.
The last commitment of traders report by the Commodity Futures Trading Commission showed that as of the March 30 close, long positioning by swap dealers increased by 284 lots during the week to 14,196 lots, as spread activity increased by 78 lots to 1,141 lots. The short positions by managed money increased slightly by 19 lots at 1,081 lots.
The second-half 2021 strip activity rebounded slightly from the previous week trading at 20.50 cents/lb. The Q4 2021/Cal 2022 spread sits unchanged at 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.
A total of 600 lots of Q4 22 cents calls traded at a premium of 0.015 cent/lb at a total cost of just over $496,000, had some market participants questioning if the premium could continue to rally further to 25 cents/lb or higher, between the tightness in the US inventories and longer-term the infrastructure bill from the Biden administration.
"Possible to see the US adjust Canadian quotas to get more inventory here but that is further out," a second trader 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 and US trade data to be released on April 7.
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.
Even with Canada shifting much of its primary aluminum production to value-added products the market continues to run short as the US Spot 6063 billet premium hit 20 cents/lb on April 1, with numbers heard above 22 cents/lb.
