New York—CME Group's AUP Midwest premium futures rallied across the whole curve on March 8, as the spot premium rose to 17 month highs amid tightening supply and traders and consumers looking to restock inventories.
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 16.937 cents/lb on March 8, up 1.104 cents/lb from the February 22 close, with 192 lots trading, as the spot premium rose by 1.35 cents/lb to 17.05 cents/lb during the same period.
"The market is very tight especially on the West Coast and areas that would trade at a discount are going at premiums on a floating basis," a consumer said.
April settled up 1.90 cents/lb to 17.75 cents/lb, with 250 lots trading during the week ended March 5, with 266 lots trading.
The March/April spread continued to widen, settling at a 0.813 cent/lb contango on March 8, as inventories have continued to draw and demand has remained steady.
April/July spread tightened to 0.833 cent/lb as did the May/July spread trading 0.684 cent/lb. The Q3 2021/Q1 2022 spread traded at a 1 cent/lb backwardation, with 160 lots trading.
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.
The latest North American aluminum production data from the Aluminum Association for February, showed Canadian production was up 5.3% year on year to 250,518 mt and US production was down 21.5% year on year to 69,911 mt.
The spot-to-six months premium spread moved back into a slight backwardation on Feb. 9 and has averaged a 0.221 cent/lb backwardation since.
The last commitment of traders report by the Commodity Futures Trading Commission showed that as of the March 2 close, long positioning by swap dealers decreased slightly by 1,248 lots during the week to 13,473 lots, as spread activity declined only slightly by 4 lots to 906 lots.
The H2 2021 strip continued to rally on the back of market sentiment that the Biden administration will keep tariffs in place, trading up to 17.40 cents/lb on March 8, up another 0.90 cent/lb on the week. The H2 2021/Cal 2022 spread sits just under a 0.75 cent/lb backwardation, as the market is now starting to price in that tariffs could be around for the balance of the year.
"Demand still good, market is getting tighter with CIF values above 20 cents," a 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. 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. 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.
