Center Valley, Pennsylvania 04/01/2016 - The forward curve for CME Group's Aluminum MW US Transaction Premium (AUP) contract has moved deeper into backwardation in March and April, which suggests that the end of the first quarter could be a trouble spot.
The December AUP contract ended last week at 8.9 cents, which was essentially unchanged week-on-week, according to exchange data.
Meanwhile, January and February settled at 8.65 cents, up 4.8 percent from the prior week, but March and April finished at 8.5 cents, down 3.0 percent, and May at 8.35 percent was off 1.2 percent.
The contracts for the June to December months each settled at 8.25 cents, unmoved week-on-week, CME reported.
Open interest in AUP now stands at 22,008 lots or 550,200 tonnes, the exchange said.
Several sources suggested that premiums might struggle towards the end of the first quarter. End-market consumers, in particular, are concerned that demand might stagnate following the Federal Reserve's decision to raise interest rates for the first time since 2006.
"All of our customers took their contract maximum for Jan-March but all those deals were done when people were worried about [first-quarter] supply. Now we're starting to hear about a little softness in February. So we're now expecting people to ask for below max levels for April-June," a primary aluminium producer recently told FastMarkets.
FastMarkets' US Midwest delivered duty-unpaid premium has eased to 8.9-9.25 cents per pound from a six-month high of 9.0-9.75 cents set in Mid-December.
Additionally, more disconcerting macroeconomic data was released this morning. The Institute for Supply Management (ISM) reported that its index of national factory activity fell to 48.2 in December from 48.6 in the previous month. A reading below 50 indicates contraction.
Meanwhile, US construction spending slipped 0.4 percent in December, marking the first month-on-month drop in more than a year-and-a-half, according to the Commerce Department.
(Editing by Mark Shaw)