March 28, 2019
The April–May spread shifted to a backwardation for the first time in nine months, tightening from a $2.75 per mton contango to a $0.50 per mton backwardation today, as the lingering “back” in the May 7–10 period almost doubled to $11.00 from $6.00 per mton. Moreover, the Cash–April contango narrowed to $10.75 from $11.25 per mton, and the May–June contango tightened to $7.50 from $8.00 per mton. As a result, the Cash–3M contango narrowed today to a one- month low of $19.25 per mton, from $23.50 per mton. We estimate that at the current level the Cash-3M contango is no longer supportive of cash-and-carry deals for most players (bearish for spot premiums, as the financing of metal becomes uneconomic).
More details in full report.