First trades for Fastmarkets-linked LME aluminium duty-paid contract

The London Metal Exchange’s new aluminium duty-paid European premiums contract, which is settled against Fastmarkets’ assessment, traded for the first time on Tuesday July 20.

The cash-settled contract had more than 1,800 tonnes cleared in the LME’s inter-office market at $359 per tonne for a September 2021 to April 2022 period. The contract, which launched on Monday July 19, is basis Fastmarkets’ aluminium P1020A premium, in-whs dp Rotterdam.

All the new cash-settled futures contracts trade monthly out to 15 months and are priced and cleared in US dollars.

Fastmarkets assessed the duty-paid premium at $320-345 per tonne on Tuesday, up from $315-335 per tonne on July 16.

The European aluminium market remains increasingly bullish due to tight supply, high freight rates and news of a Russian export duty, sources said.

Forwards lead the way
The new trades indicate a contango in the futures market for aluminium premiums, which in turn has been driving premiums in the spot market.

Premium forwards on the Chicago Mercantile Exchange (CME) have also been active in recent weeks, pushing spot premiums higher. CME forwards indicate duty-paid premiums rest of 2021 at around $358 per tonne.

“$360 per tonne is still quite high to [the current Rotterdam] premium and there are parties trying to use the [forwards] as a reference for customers,” a trader in Europe said.

Duty-paid forwards trading around the $360 per tonne level, compared to Fastmarkets’ aluminium P1020A premium, in-whs dup Rotterdam at $270-280 per tonne Tuesday, indicates a potential normalization of the traditional 3% duty-spread.

“The [forward premium] is showing the duty-spread accurately [and will continue to do so] if duty-unpaid stays where it is right now,” a second trader in Europe said.

The LME also launched a new cash-settled lithium contract this week. The lithium contract will be cash-settled against Fastmarkets’ price assessment for lithium hydroxide monohydrate, 56.5% LiOH.H2O min, battery grade, spot price, cif China, Japan & Korea. Click here to find out more information.

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