London Metal Exchange aluminium nearby spreads have moved into backwardation for the first time in five months, yet the physical market expects the recent uptrend in European premiums to continue.
Tight spreads that make stock financing unprofitable and typically prompt some destocking, which in turn put downward pressure on premiums, have yet to dent the upbeat sentiment in the European aluminium market against a backdrop of strong demand and tight supply.The LME cash/three-month spread was recently at a $6 per tonne backwardation, while the February/March spread was at a $10 per tonne backwardation. The last time the benchmark spread was in backwardation was in August 2017.Signs of tightness in the spread had emerged in the past few days, centred around the February/March date, with a few traders warning that it could put...