We’ve learned that futures markets can show prices for immediate delivery and prices for a future date. When the prices for a future date are higher than nearby prices, this is known as a “contango” situation.

Imagine you’re a producer needing to sell into the futures market to hedge and protect your business. If you’re facing a contango curve, where future prices are higher than current ones, it means your hedge will result in a higher outcome. Essentially, you’re set to make a profit.

When it comes to aluminium, the market is often in a contango situation. This consistently benefits producers by allowing them to secure profitable hedges.

However, not all metals behave the same way. Take copper, for example, it traditionally had backwardation, where future prices were lower. But after a certain point, possibly around September or October, the pricing structure shifted, and copper also moved into contango.

For aluminium producers, this kind of price curve is great news. But what about consumers? We’ll explore their side of the story next time!