2022 has been an exciting and innovative year for COMEX Aluminum futures and Aluminum product offerings. Renewed and growing interest spurred by the globalization of the COMEX Aluminum warehousing network in 2019 has positioned COMEX Aluminum futures as a viable hedging alternative to traditional global aluminum markets.
Surging Volumes and Open Interest
Since the beginning of the year, average daily volume (ADV) in COMEX Aluminum futures has increased by over 325%, and open interest in the contract has more than tripled.
Record volume days of over five thousand contracts occurred on seven separate occasions, with a high-water mark of 5,773 lots traded on July 13, 2022. ADV in July was 2,659 contracts, which also stands as a record high monthly ADV since the contract was globalized. As of Aug 4, 2022, open interest in the contract stood at 1,125, a record high since globalizing the contract.
Robust On-Screen Markets and Block Trading Capabilities
Transparent, electronic markets allow participants to execute their trades swiftly and confidently through CME Globex.
Block trades are available through the brokered market and available for submission through CME ClearPort.
Attracting More Participants
The number of traders involved in trading COMEX Aluminum futures has been on an upward trajectory this year, reaching a monthly high level of nearly 115 unique participants in July. This increase has been one of the driving factors responsible for increased volume and open interest.
Aluminum Options Launch
On May 23, CME Group launched the Aluminum option contract (AX). Available to trade electronically via CME Globex, or bilaterally negotiated and submitted as block trades through CME ClearPort, the CME Aluminum option contract provides a flexible alternative for managing aluminum price risk.
CME Group Aluminum Auction
In 2021, CME Group held the first electronic auction of aluminum based on COMEX Aluminum futures (ALI). While that auction did not result in a transaction, CME Group has since hosted four (4) aluminum auctions in 2022, two of which have resulted in transactions.
The Aluminum Auction supports established aluminum premium markets by providing participants the ability to anonymously transact physical metal in the spot market via their clearing member.
Aluminum Premiums
Financially settled aluminum premiums offered by CME Group continue to be utilized to hedge regional price exposure. Whether it is a conflict in Europe or delivery constraints in North America, CME Group offers a premium contract to fulfill your hedging requirements.
Aluminum premium contract offerings by CME Group include:
- Aluminum MW U.S. Transaction Premium (Platts) (25MT) futures (AUP)
- Aluminum European Premium Duty-Unpaid (Metal Bulletin) futures (AEP)
- Aluminum European Premium Duty-Paid (Metal Bulletin) futures (EDP)
- Aluminum Japan Premium (Platts) futures (MJP)
Volumes across AUP, AEP, EDP, and MJP had been consistent through Q1 2022, but have recently surged to a combined ADV of over 1,000 contracts. Notably, open interest in EDP has established a new record high level exceeding 20,000 contracts on July 28, 2022.
Margin Offsets
CME Group offers cost effective margin requirement offsets between Aluminum futures and other metals products. For example, the current margin offset between COMEX Aluminum futures and COMEX Copper futures is 40%.
Inters / Intex / Supers for Performance Bonds | Margins (cmegroup.com)
Introduced in July, margin offsets are now offered for Aluminum Butterfly Spread trades.
Conclusion
CME Group Aluminum products are becoming increasingly relevant amongst the trading community. Aluminum futures and option contracts, Aluminum Premium contracts, the Aluminum Auction offering, and margin offsets are providing participants with the confidence needed to successfully execute their trading strategies in a transparent and cost-efficient manner.
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All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
