LME nearby backwardation emerges amid April contract’s settlement (bearish for spot premiums around the world)
The April-May spread tightened to a backwardation of $3.00 per mton, compared to a $0.50 per mton contango yesterday. As today’s Cash contract was also April’s third-Wednesday prompt date contract, it seems that the short position holder that had been carrying 10%–19% of April positions (about 75–150 kmton) is being somewhat squeezed by reduced liquidity and narrow availability of free- floating warrants. In fact, the Tom–Next spread also settled at a slight backwardation for the first time in five weeks, at $0.25 per mton compared to a contango of $0.50 per mton on Friday. As a result, the LME Cash–3M contango tightened to a new two-week low of $17.00 per mton from Friday’s $19.00 per mton.
More details in full report.