{"id":6515,"date":"2025-01-03T08:17:50","date_gmt":"2025-01-03T08:17:50","guid":{"rendered":"https:\/\/www.alcircle.com\/blog\/?p=6515"},"modified":"2025-01-04T04:45:18","modified_gmt":"2025-01-04T04:45:18","slug":"jorge-blog-hedging-with-jorge-episode20-contango-to-backwardation-lessons-from-the-aluminium-market","status":"publish","type":"post","link":"https:\/\/www.alcircle.com\/blog\/jorge-blog-hedging-with-jorge-episode20-contango-to-backwardation-lessons-from-the-aluminium-market","title":{"rendered":"Hedging with Jorge #Episode20: Contango to Backwardation, lessons from the aluminium market"},"content":{"rendered":"\n<p>As we step into 2025, let&#8217;s explore a fascinating shift in the aluminium market: how a typical contango can transform into backwardation.<\/p>\n\n\n\n<figure class=\"wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio\"><div class=\"wp-block-embed__wrapper\">\n<div class=\"youtube-embed\" data-video_id=\"lIcb4aZqPq8\"><iframe loading=\"lazy\" title=\"Hedging with Jorge #Episode20: Contango to Backwardation, lessons from the aluminium market\" width=\"696\" height=\"392\" src=\"https:\/\/www.youtube.com\/embed\/lIcb4aZqPq8?feature=oembed&#038;enablejsapi=1\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe><\/div>\n<\/div><\/figure>\n\n\n\n<p><\/p>\n\n\n\n<p><strong>Contango in Aluminium:<\/strong> In a normal aluminium market, the three-month price is historically higher than the cash price\u2014a classic contango. This reflects costs like storage, insurance, and interest. However, this equilibrium can shift under specific circumstances.<\/p>\n\n\n\n<p><strong>The Shift to Backwardation:<\/strong> Backwardation occurs when nearby prices rise higher than future prices. This shift doesn\u2019t happen overnight\u2014it\u2019s often triggered by significant events.<\/p>\n\n\n\n<p>One such event was the conflict between Russia and Ukraine, nearly three years ago. Russia, producing over 1 million tonnes of aluminium annually, faced sanctions, causing market fears of reduced supply. The result? A sharp rise in nearby aluminium prices, skyrocketing to $4,130, while the three-month price lagged $300 lower.<\/p>\n\n\n\n<p><strong>The Reversal:<\/strong> Interestingly, within three months, the market returned to contango, and prices normalized around $2,500. This dramatic fluctuation highlights how external factors, market sentiment, and supply dynamics shape aluminium pricing.<\/p>\n\n\n\n<p><strong>What\u2019s Next?<\/strong><\/p>\n\n\n\n<p>In our next discussion, we\u2019ll dive deeper into why markets swing between backwardation and contango. Stay tuned, and here\u2019s to a prosperous start to 2025!<\/p>\n","protected":false},"excerpt":{"rendered":"<p>As we step into 2025, let&#8217;s explore a fascinating shift in the aluminium market: how a typical contango can transform into backwardation. Contango in Aluminium: In a normal aluminium market, the three-month price is historically higher than the cash price\u2014a classic contango. This reflects costs like storage, insurance, and interest. However, this equilibrium can shift [&hellip;]<\/p>\n","protected":false},"author":89,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"class_list":{"0":"post-6515","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-open-forum-for-aluminum-community-blog"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Hedging with Jorge Contango to Backwardation<\/title>\n<meta name=\"description\" content=\"Let\u2019s explore a fascinating shift in the aluminium market: how a typical contango can transform into backwardation\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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