Managing Aluminum Risk

  • 16 Oct 2017
  • By CME Group
  • Topics: Metals

Aluminium Futures Contracts at CME Group

Four actively traded Aluminium Premium futures contracts with strong regional relevance represent great opportunities to execute relative value arbitrage strategies between them.

Other futures contracts include Alumina, physically-delivered Primary Aluminum and A380 Alloy which are available to help you hedge your risk exposure across the whole aluminium supply chain.

Contract

Code

Contract Size, mt

Open Interest, Contracts

Open Interest, mt

YTD ADV, mt

Aluminum MW US Transaction Premium Platts (25mt)

AUP

25

26,298

657,450

8,475

Aluminium European Duty-Unpaid (Metal Bulletin)

AEP

25

14,515

362,875

3,023

Aluminium European Duty-Paid (Metal Bulletin)

EDP

25

10,709

267,725

1,193

Aluminum Japan Premium (Platts)

MJP

25

7,385

184,625

1,549

Alumina FOB Australia (Platts) Futures

ALA

100

3,900

390,000

2,846

Aluminum Futures

ALI

25

188

4,700

760

Aluminum A380 Alloy (Platts) Futures

A38

20

3

Alumina FOB Australia (Metal Bulletin) Futures

ALB

100

Data as of 29 September 2017

A Bit of History

Major turbulence shocked the global aluminium market in recent years as physical premiums became increasingly more volatile.

Having peaked in late 2014/early 2015, spot aluminium premiums subsequently collapsed to levels not seen since 2010. Record levels of volatility and absence of any hedging instruments resulted in significant risk exposure for the aluminium industry.

In April 2012, CME Group responded to the market’s needs by introducing Aluminum MW U.S. Transaction Premium Platts (25MT) Futures (AUP) cash-settled against S&P Global Platts Index benchmark.

In the following years, CME Group launched other regional premium futures contracts: Aluminium European Duty-Unpaid (Metal Bulletin) and Aluminum Japan Premium (Platts) in 2015, and Aluminium European Duty-Paid (Metal Bulletin) in 2016.

How Aluminium Premium Futures Work at CME Group

Our Aluminium Premium contracts are standard futures, which are cash-settled every month against the monthly average prices published by the respective Price Reporting Agency. All premium contracts can be traded for the current year plus the next calendar year while MW U.S. Transaction Premium can be traded 60 months forward.

Transparency of the Daily Settlement Mechanism

Daily settlements are based on market information that may include, but is not limited to:

  • Resting bids and asks on CME Globex with consideration given to trades, executed on the platform throughout the day
  • Price data obtained from a cross section of the OTC brokers collectively representing commercial buyers and sellers as well as other OTC market participants
  • Price data from other sources deemed reliable and accurate by the Exchange

Aluminium Contract Suite – Aggregated Open Interest at CME Group

Open interest reached an all-time high on March 1, 2017. After a temporary decrease, as existing hedges were settled against the respective index benchmarks, market activity has picked up again in August as contracts are booked for the new year.

Growing Volumes Across All Premium Contracts

As all four regional contracts gain traction, traded volumes diversify further from Aluminum MW U.S. Transaction Premium to European Premium Duty-Paid and Unpaid contracts as well as the Aluminum Japan Premium.

AEP and EDP – Record Volumes and Open Interest Across Aluminium European Premium Futures

European Premium Duty-Unpaid (AEP) contract hit a new record volume on 1 August 2017, when 1,980 lots (49.5k MT) traded.

European Premium Duty-Paid (EDP) contract volume reached an all time high on 9 August 2017, when 1,680 lots (42K MT) traded.

Open interest reached all-time highs a few times this year: 16,273 lots for AEP on 27th of March while EDP reached 11,225 lots on 31st of August.

AUP – 700K MT of Open Interest Five Years Forward

Aluminum MW U.S. Transaction Premium Platts (AUP) open interest hit an all-time high in March 2017 with 37,464 lots.

AUP is the only Aluminium premium contract that is available for trading 60 months forward. Currently, open interest extends out to December 2021.

Over 420K MT traded in January 2017, the record volume month for the contract.

MJP – A Closer look at Aluminum Japan Premium (Platts) Futures

July 2017 was a record month for MJP as nearly 70K MT traded while open interest touched an historic record at 7,385 lots on 29 September.

Enjoy the Best of the Futures Market

Enjoy the Best of the Futures Market

Aluminium Premium futures are predominantly executed as block trades and cleared through CME ClearPort. The contracts are also available to trade on CME Globex, our electronic trading platform. Market users have unprecedented visibility of the trade flow while maintaining anonymity of all participating parties.

Immediate Profit and Loss Realisation

All Aluminium futures products offer immediate realisation of the trading profit and loss upon close-out of the contract with an offsetting transaction.

If a contract is held until expiry, cash settlement occurs after the last business day of the expiring month. Aluminum Futures are the only physically-deliverable contract in the entire suite.

Cross Margin Benefits

Initial margin charges can be partially offset if you have the opposite position in another commodity contract cleared through the same FCM at CME Group.

Further information on CME Group margin offsets can be found at: www.cmegroup.com/aluminummargins.

Building New Markets – Alumina Futures

CME Group launched the first globally traded Alumina FOB Australia futures contract to provide the industry with a unique efficient tool to hedge risk exposure in an uncorrelated and extremely volatile commodity.

Clients can choose between Alumina FOB Australia (Platts) futures (ALA) or Alumina Australia (Metal Bulletin) futures (ALB) which provides them with additional flexibility to manage alumina risk exposure.

The innovative contract, Alumina FOB Australia (Platts) Futures, is slowly gaining traction with 25,000 MT traded in July 2017 followed by nearly 200K mt in August and 300K mt in September.

Independent Software Vendor (ISV) Codes

Product Name CME Globex/ ClearPort Bloomberg Reuters TT CQG Fidessa ION (Pats and FFastFill) SunGard DTN (ProphetX) Exchange
Base Metals
Aluminum MW U.S. Transaction Premium Platts (25MT) Futures AUP AUPA Comdty 0#1AUP: AUP AUP AUP AUP AUP QAUP COMEX
Aluminium European Premium Duty-Unpaid (Metal Bulletin) Futures AEP OPE1 Comdty 0#1AEP: AEP NAEP AEP AEP AEP QAEP COMEX
Aluminium European Premium Duty-Paid (Metal Bulletin) Futures EDP PEDA Comdty EDP, 1EDP EDP EDP EDP EDP EDP QEDP COMEX
Aluminum Futures ALI ALE1 Comdty 0#ALI: ALI ALI ALI ALI ALI QALI COMEX
Aluminum Japan Premium (Platts) Futures MJP MJPA Comdty 0#1MJP MJP MJP MJP MJP MJP QMJP COMEX
Aluminum A380 Alloy (Platts) Futures A38 OYPA Comdty 0#1ALMN A38 A38 A38 A38 A38 QA38 COMEX
Alumina FOB Australia (Platts) Futures ALA ALAA Comdty 1AAL, AAL, 7AAL ALA ALP ALA ALA ALA QALA COMEX
Alumina FOB Australia (Metal Bulletin) Futures ALB FALA Comdty 1BAL, BAL, 7BAL ALB ALB ALB ALB ALB QALB COMEX

To learn more about Aluminium futures at CME Group, please visit cmegroup.com/aluminum or contact  metals@cmegroup.com.

About CME Group

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