Increased risk of an LME backwardation for next two weeks (would be bearish for spot premiums).

Risk of nearby backwardations increased as conditions tighten further ahead of March’s third-Wednesday (still two weeks from today). The LME Cash prices closed today at level with March 20 (third-Wednesday) prices after yesterday’s contango of $2.50 per mton, while the Tom–Next spread settled at the sharpest backwardation in two months at $5.00 per mton after yesterday’s contango of $0.62 per mton. The Tom–Next spread is the fee exchanged for rolling over an LME contract expiring tomorrow into Cash or two business days ahead. Nevertheless, the Cash–3M contango widened a bit as March–April loosened.

More details in full report.