Aluminium Market Divergence: Strategic Sector Rotation in a Bifurcated Industrial Landscape

The U.S. aluminium market has entered a period of stark divergence, with speculative positioning data from the Commodity Futures Trading Commission (CFTC) revealing a critical inflection point for investors. By Q4 2025, the Commitments of Traders (COT) reports for aluminium futures underscored a widening gap between construction-linked and automotive-grade aluminium markets, offering a roadmap for tactical asset allocation. This divergence is not merely a reflection of supply-demand imbalances but a harbinger of sectoral re-rating, driven by policy, pricing power, and hedging strategies.

Construction-Linked Aluminium: A Bullish Case for Infrastructure-Driven Growth

The Aluminum Midwest Premium (MWP) futures contract (Code 191693) closed the quarter with a speculative net long of 1,054 contracts, with commercial traders controlling 84.1% of the long positions. This positioning reflects robust hedging activity by producers and end-users facing structural supply constraints. U.S. Section 232 tariffs and Chinese production caps have created a shortage in construction-grade aluminium, pushing the MWP price to $1,323 per metric ton (MT).

Historical backtests reveal a compelling pattern: speculative net longs in construction-linked aluminium have historically correlated with 12–15% outperformance in construction equities within three months. This aligns with the One Big Beautiful Bill Act (OBBBA), which has driven record nonresidential construction spending. For instance, Vulcan Materials (VLC) saw EBITDA margins expand by 8% in 2024, while Kaiser Aluminum (KALU) benefited from cost pass-through mechanisms.

Automotive-Grade Aluminium: A Bearish Signal for Cost-Sensitive Sectors

In contrast, the Aluminium Euro Prem Duty-Paid (Code 191696) contract displayed a speculative net short of 2,315 contracts, with non-commercial short positions surging by 1,490 contracts in the quarter. This bearish positioning highlights automakers' vulnerability to un-hedged aluminium costs. Tesla (TSLA), for example, saw EBITDA margins decline from 14% in 2023 to 6% in Q2 2025, directly tied to aluminium price inflation. Unlike construction firms, automakers lack pricing power to offset these costs in a weak demand environment.

While Ford (F) mitigated risks via a $1.2 billion long-term supply agreement, Tesla's reliance on spot markets leaves it exposed. A 57% drop in speculative net longs in July 2025 coincided with a reacceleration in construction-linked equities, underscoring the predictive power of positioning data.

Strategic Asset Allocation: Overweight Construction, Underweight Automotive

The CFTC data signals a clear sectoral re-rating. Investors should overweight construction-linked firms with infrastructure exposure and pricing power, such as KALU and VLC, which are poised to benefit from OBBBA-driven demand. Conversely, unhedged automotive stocks like Tesla should be underweighted, with aluminium futures options considered for hedging.

Packaging firms like Ball Corp (BLL) and WestRock (WRK) offer a counterbalance, leveraging recycling buffers and deflationary price trends. These companies have historically outperformed during periods of aluminium price volatility, as seen in 2022–2023.

Conclusion: Positioning as a Leading Indicator

The Q4 2025 COT reports highlight a bifurcation in the industrial economy, with capital shifting toward infrastructure builders while automakers face margin pressures. By aligning portfolios with these positioning trends, investors can capitalize on structural supply constraints and policy-driven demand. In a tightening cost-of-carry environment, tactical adjustments to overweight construction materials and underweight cost-sensitive sectors are not just prudent—they are imperative.