Aluminum Markets Split: Construction Booms, Autos Sink

The U.S. Commodity Futures Trading Commission's (CFTC) latest Commitments of Traders (COT) report on aluminum markets has unveiled a striking divergence in speculative positioning, offering a clear signal for investors to reassess sector allocations. While construction-linked aluminum markets exhibit robust bullish momentum, automotive-grade aluminum faces a record bearish outlook. This split reflects a broader reallocation of capital toward infrastructure-driven demand and away from automakers grappling with margin compression.

Construction Aluminum: A Policy-Driven Bull Case

The Aluminium Midwest Premium (MWP) futures contract (Code 191693), a proxy for construction-grade aluminum, now holds a speculative net long position of 1,054 contracts, with commercial hedgers accounting for 84.1% of longs. This surge is underpinned by structural supply constraints and policy tailwinds. U.S. Section 232 tariffs on aluminum imports, China's production caps, and the One Big Beautiful Bill Act's (OBBBA) $1.2 trillion infrastructure allocation have created a perfect storm for construction aluminum.

The MWP price has climbed to $1,323 per metric ton (MT), reflecting strong pricing power. Investors in construction materials equities—such as Kaiser Aluminum (KALU) and Vulcan Materials (VLC)—have seen EBITDA margins expand, driven by inelastic demand and limited supply flexibility. These firms are now positioned to benefit from a multi-year infrastructure boom, with speculative capital aligning with long-term policy goals.

Automotive Aluminum: A Bearish Overhang

In stark contrast, the Aluminium Euro Prem Duty-Paid (Code 191696) contract, representing automotive-grade aluminum, has a record -2,900 net short contracts, with non-commercial short positions surging by 1,490 contracts in Q4 2025. This bearish positioning exposes automakers to un-hedged input costs, exacerbating margin pressures. Tesla (TSLA), for instance, has seen EBITDA margins decline from 14% in 2023 to 6% in Q2 2025, as aluminum price inflation and weak demand erode profitability.

Automakers face a dual challenge: rising aluminum costs and an inability to pass these expenses to consumers in a softening market. Unlike construction firms, which can leverage regulatory support to maintain pricing power, automakers are constrained by competitive pricing dynamics and thin margins. This has led to a speculative flight from automotive-grade aluminum, signaling a structural shift in capital flows.

Strategic Implications for Investors

The CFTC data underscores a critical inflection point for sector rotation. Investors should overweight construction materials equities with strong hedging positions and policy tailwinds, while underweighting unhedged automakers exposed to volatile aluminum markets. Key opportunities include:
- Kaiser Aluminum (KALU): Positioned to benefit from OBBBA-driven demand and supply constraints.
- Vulcan Materials (VLC): Leveraging infrastructure spending to expand margins.
- Aluminium Midwest Premium (MWP) futures: A direct play on construction aluminum's bullish trajectory.

Conversely, Tesla (TSLA) and other automakers with weak hedging strategies face ongoing margin risks. The automotive sector's speculative short positions are not a temporary correction but a reflection of long-term structural challenges in a decarbonizing economy.

Conclusion: A Macro Shift in Industrial Demand

The CFTC's COT report is more than a weekly data point—it is a barometer of industrial demand. The current divergence in aluminum markets highlights a capital reallocation from cyclical automotive sectors to policy-driven infrastructure. Investors who align their portfolios with this shift stand to capitalize on durable growth in construction materials while avoiding the margin pressures facing automakers.

As the CFTC releases updated COT data on Fridays (e.g., December 12 and 19), monitoring these speculative trends will remain critical. The aluminum market's split positioning is a harbinger of broader macroeconomic realignment, and those who act decisively will be well-positioned for the next phase of industrial transformation.