Spread tightness continues to intensify ahead of May as LME warrant concentrations could increase (bearish premiums)
March 13, 2019
The April–May contango shrank to a five-month low today to $2.25 per mton from $2.50 per mton yesterday. A significant tightening in this segment (from a contango of $7.75 per mton on Friday) could be related to the presence of a sizeable long position due in April’s third-Wednesday (there was one entity carrying the equivalent of 349-507 kmton), which could tighten the market ahead of the expiration of significant shorts due in May (for which one entity was carrying the equivalent of 251–452 kmton). Re-emergence of a dominant warrant holder also increases the risks of tightening spreads ahead. As a result, the LME Cash–3M contango narrowed to a one-week low of $24.00 from yesterday’s $25.50 per mton.
More details in full report.