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LME aluminum inventory builds deflate backwardation
Edited by : AL CIRCLE
1 min read
Recent increases in LME aluminium warehouse stocks have deflated the backwardation that was in the market, says MF Global.
Backwardation is a condition in commodities markets where nearby prices are more expensive than deferred and is generally seen as a sign of supply tightness.
“It seems that the rapid rate of LME stock increases has ended, at least for today, with stocks only up by 1,300 tons overnight,” says analyst Edward Meir. “However, it seems the cumulative increase we have seen this past week (some 120,000 tons all in all) has been enough to deflate the backwardation, as least judging by where things are today.
Latest quotes are showing cash to three’s now at an $11 contango, down from level yesterday, while cash to June is at $1 back, down from $40 back earlier in the week.
It remains to be seen whether we are going to flare out again after this hasty collapse, but given how relatively little it took in terms of stock accumulation to nip this latest backwardation in the bud, the odds of a snap-back look somewhat remote.”
Backwardation is a condition in commodities markets where nearby prices are more expensive than deferred and is generally seen as a sign of supply tightness.
“It seems that the rapid rate of LME stock increases has ended, at least for today, with stocks only up by 1,300 tons overnight,” says analyst Edward Meir. “However, it seems the cumulative increase we have seen this past week (some 120,000 tons all in all) has been enough to deflate the backwardation, as least judging by where things are today.
Latest quotes are showing cash to three’s now at an $11 contango, down from level yesterday, while cash to June is at $1 back, down from $40 back earlier in the week.
It remains to be seen whether we are going to flare out again after this hasty collapse, but given how relatively little it took in terms of stock accumulation to nip this latest backwardation in the bud, the odds of a snap-back look somewhat remote.”
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