Metal Price Term Structure

John Robertson


One insight into the short-term pressures on metal prices comes from movements in the price structure on forward markets. The blue bars in the chart are a summary measure of the differences between forward prices and cash prices for the six main daily traded nonferrous metals - aluminium, copper, lead, nickel, tin and zinc - on the London Metal Exchange. The spread between cash and forward prices at the end of August remained positive for the ninth consecutive month. The size of the spread has been relatively modest but enough to keep downward pressure on prices. A widening price spread will usually mean supplies are abundant and that forward prices will adjust to reflect the financing and warehousing costs of holding metal. Narrowing spreads - with the term structure possibly moving into backwardation - will tend to mean near term shortages of metal which lead to upward pressure on spot prices. The daily price movements offer some of the most timely information about changes in the underlying condition of the metal markets.

3 topics

John Robertson
John Robertson

John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...


No areas of expertise

I would like to

Only to be used for sending genuine email enquiries to the Contributor. Livewire Markets Pty Ltd reserves its right to take any legal or other appropriate action in relation to misuse of this service.

Personal Information Collection Statement
Your personal information will be passed to the Contributor and/or its authorised service provider to assist the Contributor to contact you about your investment enquiry. They are required not to use your information for any other purpose. Our privacy policy explains how we store personal information and how you may access, correct or complain about the handling of personal information.


Sign In or Join Free to comment