HOTLINE: Would you bet the house on aluminium premiums falling?

Errr: the aluminium market has been here before, has it not?

Errr: the aluminium market has been here before, has it not?

Those trading and analysing it are singing in chorus: aluminium premiums are sure to fall from the extraordinary levels to which they have risen.

(Duty-unpaid aluminium premiums in Rotterdam as assessed by Metal Bulletin have risen, for example, by around 40%, while delivered premiums in the US midwest have climbed by almost 80% since the end of 2013.)

There is clear call too on the time when the premium is expected to come off: in the third quarter.

Which mirrors neatly the market consensus in the third and fourth quarter of 2013, when consumers and swaps traders took the view that leaving themselves physically short would give them access to lower prices when they had to cover early in 2014.

Of course, that anticipation was wrong at the end of 2013 as the subsequent short-covering proved.

And in the aluminium market, history has a tendency to repeat itself.

After all, the same thing happened at the end of 2012. And this year there are not even any looming backwardations on the forward curve that could stifle financing demand.

Will physical shorts once again regret leaving themselves uncovered in the second half of the year?

The aluminium market may be betting against it.

But Hotline wouldn’t…