Spot prices maintain record highs
Increase in retrocessions compared to Q4, Q1 2022
CME Group’s premium AUP Midwest aluminum futures remained stable in the front end of the 2021 curve, with the rear end declining slightly with some positions moving from Q4 to Q1 2022.
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As labor and scrap markets remain tight and transportation costs rise, there has been increased demand for P1020 and aluminum slabs from factories unable to obtain the monthly scrap requirements.
Futures contracts trade on CME Globex and CME Clearport and are settled monthly based on the S&P Global Platts Midwest transaction premium.
“Freight [are] continues to increase, ”said one trader.
The Platts US Midwest Premium hit a record high of 27.40 cents / pound on June 7 and has remained there ever since, waiving import duties of 12.264 cents / pound as of June 11, the US Midwest premium is still lower to 2015 levels when it was extended LME warehousing queues. Market sources have said replacement costs are now increasing by 30 cents / pound.
The June contract was up 0.15 cents / pound on the week to 27.25 cents / pound on June 14.
The June / July spread narrowed slightly to a 1.10 cents / pound offset as stocks continued to benefit from strong demand and traders attempted to restock, particularly in Toledo, New York and Baltimore.
“Heavy consumers are no longer getting discounts,” said a second trader.
“The west coast is extremely tight and short of metal,” said a third trader.
As the offset continues, market players are still actively selling the first month’s contracts and buying additional dated strips in 2021 to capture part of the offsets and replenish stocks.
The July / October spread moved into a steeper pullback on June 14, standing at 3.90 cents / lb. Some long positions were carried over into the second half of 2021 and into the first quarter of 2022, as new buys continued to arrive on the curve. The Q3 / Q4 spread also narrowed, settling at a 3.30 cents / pound bias, with Q3 trading 24.80 cents / pound to 25 cents / pound, down slightly on the week and Q4 trading at 21.90 cents / pound on the CME during the week ended June 14.
The Fourth Quarter Band gave up some of its recent gains, as positions moved from the fourth to the first quarter of 2022, with 960 lots trading in the spread of 2.35 cents / pound to 2.50 cents / delivered. The spread remained relatively unchanged for the week as the market began to forecast some relief in freight costs and increased import flows.
The six-month spot premium spread maintained its offset from the previous week and averaged 5.168 cents / lb during this period.
The latest Commitment of Traders report from the Commodity Futures Trading Commission showed that at the close of June 8, long positioning of swap brokers had fallen from 942 lots during the week to 12,439 lots, as activity spread decreased from three lots to 942 lots. Short positions in the managed currency decreased from 344 lots to 798 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.
April trade data from the US Census Bureau showed imports from Canada reached 140,088 mt, up 36.9% month-on-month, but still down 12.98% from April 2020 .
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. .
Even as Canada shifts 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 on April 15 and has stayed there ever since.