AMU Explainer: Backwardation versus contango and why it matters

AMU Explainer is a series where we demystify parts of the aluminum industry. We invite your feedback and suggestions. And as always, feel free to reach out for any clarification about this or other topics.

When I joined the metals industry from trading soft commodities (grain, fertilizers, orange juice), one of the first things I had to understand was “backwardation” and “contango.” I thought backwardation was a made-up word and contango was a South American dance. I soon learned they were legitimate descriptions of market conditions that I had grown up with as a grain trader for years.