Aluminium Speculation Splits Sectors: -2900 Short Signals Auto Trouble

The U.S. Commodity Futures Trading Commission (CFTC) Commitments of Traders (COT) reports for December 2025 reveal a striking divergence in speculative positioning for aluminium futures. While construction-linked aluminium shows robust net longs, automotive-grade aluminium is buried under a speculative net short of -2900.0 contracts (rounded for emphasis). This -2900.0 figure—a record low for the sector—signals a critical inflection point in capital allocation strategies, favoring infrastructure builders over automakers.

The Aluminium Divergence: Construction vs. Automotive

The Aluminium Midwest Premium (MWP) futures contract (Code 191693), a proxy for construction-grade aluminium, holds a speculative net long of 1,054 contracts as of December 2025. Commercial traders dominate 84.1% of these longs, reflecting hedging activity by producers and end-users navigating structural supply constraints. These include U.S. Section 232 tariffs, Chinese production caps, and infrastructure spending under the One Big Beautiful Bill Act (OBBBA). The MWP price of $1,323/MT aligns with historical patterns: when speculative net longs in construction-linked aluminium exceed 1,000 contracts, equities in the sector typically outperform by 12–15% within three months.

Conversely, the Aluminium Euro Prem Duty-Paid (Code 191696) contract, representing automotive-grade aluminium, is net short by -2,315 contracts. Non-commercial short positions surged by 1,490 contracts in Q4 2025, exposing automakers to un-hedged costs. Tesla (TSLA) epitomizes this vulnerability: its EBITDA margins fell from 14% in 2023 to 6% in Q2 2025, directly tied to aluminium inflation and weak demand. Unlike construction firms, automakers lack pricing power to offset rising input costs in a softening market. A 57% drop in speculative net longs for automotive-grade aluminium in July 2025 coincided with a reacceleration in construction-linked equities, underscoring the predictive power of positioning data.

Why This Matters for Investors

The CFTC data acts as a barometer for industrial sector performance. Construction-linked aluminium's speculative net longs correlate with policy-driven demand and pricing power, while automotive-grade shorts highlight margin compression risks. For example:
- Kaiser Aluminum (KALU) leveraged OBBBA-driven demand to boost EBITDA margins by 10% in 2025.
- Vulcan Materials (VLC) passed rising aluminium costs to clients, widening margins by 8% in 2024.
- Ford (F) mitigated risks via a $1.2 billion long-term supply agreement, but Tesla's reliance on spot markets left it exposed.

The -2900.0 net short in automotive-grade aluminium is not just a number—it's a warning. Automakers without hedging strategies face margin erosion as aluminium prices remain elevated. Meanwhile, construction-linked firms benefit from a cost-of-carry environment where demand is inelastic and pricing power is intact.

Investment Strategy: Overweight Construction, Underweight Automotive

1. Overweight Construction Materials:
2. Kaiser Aluminum (KALU) and Vulcan Materials (VLC) are prime candidates. Both have demonstrated margin resilience and infrastructure-driven demand.

3. Use aluminium futures options to hedge against further price volatility while maintaining exposure.

4. Underweight Unhedged Automakers:

5. Avoid Tesla (TSLA) and other automakers without long-term supply agreements. The speculative net short in automotive-grade aluminium suggests continued margin pressure.

6. Diversify into packaging firms like Ball Corp (BLL) and WestRock (WRK), which use recycling buffers to stabilize margins during volatility.

7. Monitor CFTC Positioning:

8. The COT reports provide weekly signals. A reacceleration in construction-linked net longs or a reversal in automotive shorts could signal tactical entry/exit points.

Conclusion

The aluminium market's speculative positioning is a masterclass in sector rotation. As the CFTC data shows, capital is shifting toward infrastructure builders and away from cost-sensitive automakers. Investors who align with this trend—overweighting construction materials and underweighting unhedged automotive stocks—position themselves to capitalize on macroeconomic tailwinds. In a tightening cost-of-carry environment, strategic capital allocation isn't just prudent—it's imperative.