Since the globalization of the COMEX Aluminum contract in July 2019, which included the addition of warehouse facilities in Europe and Asia, COMEX Aluminum and LME Aluminum have been highly correlated. This correlation has given rise to arbitrage opportunities between the two markets.
Correlation of 99.97%
COMEX Aluminum and LME Aluminum have been 99.97% correlated on a settlement basis. This correlation exists between the LME 3m price and the COMEX active contract.
Source: Bloomberg
COMEX Active contract
The COMEX Aluminum active month, or lead month, is the anchor month for settlements and will be the third chronological month. However, on the 15th of the current calendar month, the lead month becomes the 4th fourth chronological month, and remains the 4th fourth chronological month until expiry of the current calendar month.
|
On and between these dates in 2022… |
…the active/lead contract month is… |
|
Jan 3-Jan 14 |
Mar-22 |
|
Jan 18-Feb 14 |
Apr-22 |
|
Feb 15-Mar 14 |
May-22 |
|
Mar 15-Apr 14 |
Jun-22 |
|
Apr 18-May 13 |
Jul-22 |
|
May 16-June 14 |
Aug-22 |
|
June 15-July 14 |
Sep-22 |
|
July 15-Aug 12 |
Oct-22 |
|
Aug 15-Sept 14 |
Nov-22 |
|
Sept 15-Oct 14 |
Dec-22 |
|
Oct 17-Nov 14 |
Jan-23 |
|
Nov 15-Dec 14 |
Feb-23 |
|
Dec 15-Jan 13 '23 |
Mar-23 |
Arbitrage opportunities
While the correlation between the two markets remains high, arbitrage opportunities do continue to present themselves. Historically, the differential between COMEX and LME Aluminum has ranged between $40 COMEX premium and $30 COMEX discount, on a settlement basis, excluding outliers.
Source: Bloomberg
The average COMEX-LME differential from July 2019 through May 2022 has been approximately $16 COMEX premium.
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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.
