London Metal Exchange spreads are usually a key driver for duty-unpaid aluminium premiums in Europe but this was not the case toward the end of 2020, leaving market participants wondering what will be main driver in 2021.
Since late November, the Rotterdam duty-unpaid premium has been steadily rising despite spreads trading at levels that would usually bring it down.
Fastmarkets assessed the
aluminium P1020A premium, in-whs dup Rotterdam at $110-115 per tonne Monday January 4, a level it moved to on December 24, 2020.
On paper, spreads are trading at levels where it is not profitable to cover financing costs to carry metal and usually drive the duty-unpaid premium lower. The cash/three-month spread was at a $4.25 per tonne contango Tuesday January 5, and the nearby January/February spread was at a $3.50 per tonne backwardation.
But market participants note the market has shrugged off the usual effects of tight spreads by positioning and hedging against it earlier in 2020 - and this could continue to be a theme in early 2021.
"Everyone's already borrowed [against the spread], I don't see it as a...