Buyers have stopped purchasing beyond the very short term as they see the falls continuing, and with London Metal Exchange warehouse stocks having dropped by 10% this year, and 30% from their peak at the start of 2014, there is widespread confidence that the troubles that pushed some consumers toward legal action against the LME and the owners of its approved warehouses may now be coming to an end.
But that does not mean that it could not happen again. Everything that followed the 2008-09 global financial crisis in the aluminium market – the warehouse stock build, the financing deals, the spiralling premiums – rested upon a fundamental aspect of the market that has not changed.
That is the soaring contango on the long-term aluminium forward curve.
While nearby cash-to-three-month spreads have shown high volatility this year and contributed somewhat to the fall in premiums in doing so, the curve is still...