Market participants are becoming intrigued with the recent success of the COMEX Aluminum futures contract.  Robust on-screen liquidity, increased volume, and increasing open interest is making it increasingly difficult for the trading community to ignore.

As more attention is drawn towards COMEX Aluminum futures, clarifying information can be key to tearing down the barrier to participation.

The physically deliverable COMEX Aluminum futures contract is a duty-unpaid contract, with global delivery points.

In July 2019, COMEX globalized the Aluminum futures contract (ALI) by expanding its warehousing network to include delivery points in North America, EMEA, and APAC.  As of May 2022, warehouses are located in nine different locations with a total of 16 approved warehouses. 

The contract is duty-unpaid; however, duty-paid metal may also be delivered against the contract.

Current warehouse locations (as of May 2022)

  • U.S. – Owensboro, KY; New Orleans, LA; Toledo, OH
  • EMEA – Rotterdam, the Netherlands; Bilboa, Spain; Antwerp, Belgium
  • APAC – Johor, Malaysia; Port Klang, Malaysia; Singapore

COMEX Aluminum futures are quoted in USD per metric ton ($/MT).

This is a common misconception as COMEX ALI differs from the legacy COMEX Copper futures contract, which is quoted in USD per pound ($/LB). Additionally, COMEX Copper futures are a duty-paid contract with warehouse locations only in North America.

Having another Aluminum futures contract can be beneficial to the overall market.

As COMEX Aluminum specifications widely match those of competing exchanges, pricing in the market will also closely correlate with other international reference prices. However, the correlation is not perfect, opening arbitrage opportunities and relative value trades between instruments listed on different exchanges and delivered in different locations.  Other commodity markets have greatly benefited from having liquid futures contracts listed at various exchanges.

  • COMEX Aluminum futures operates on a monthly futures structure, with contracts settling on the third last business day of the month, similar to COMEX Copper futures.
  • Futures contract size for COMEX Aluminum is 25 metric tons.
  • Load out requirements (2% of total inventory with a minimum of 1,000MT by primary conveyance) are by individual warehouse.
  • Preference for load out is given to cancelled warrants (futures first) – ensuring warehouse load out obligation is being met with metal from exchange related activity.
  • Warehouses are required to report daily inventory of all metal in store. A daily stock report is published by the Exchange by location and indicates the level of both eligible and registered inventory and the movement into and out of each location.
  • All warehouses approved for delivery of Aluminum must have adjacent indoor and outdoor storage space.
  • COMEX does not generate any revenue from Exchange approved warehouses.

On-screen liquidity is robust, deep, and transparent.

Trading in COMEX Aluminum futures are available onscreen through Globex or through the brokered block market and cleared via CME ClearPort, giving participants multiple venues at which to execute trades. 

The ability to execute and on-screen transparency is reflected through increased average daily volume (ADV) and open interest (OI), which reached yearly high levels in August 2021.  Monthly ADV set an all-time high of nearly 1,650 contracts in May 2022, after breaching 5,000 contracts traded on multiple days during the month

Liquidity in the ALI contract transitions with predictability.

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 fourth chronological month and remains the 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

Strict position limits in COMEX Aluminum futures only apply to the spot month. COMEX Aluminum futures has position accountability for any single month, or all months combined.

Position limits in COMEX Aluminum futures are categorized as Spot Month Position Limits and Position Accountability Levels. 

Spot Month Position Limits in COMEX Aluminum futures are levels which a market participant may not exceed unless they have an approved exemption. Any positions in excess of these limits would be considered a rule violation pursuant to Rule 562.

Position Accountability Levels are levels which a market participant may exceed and not be in violation of an Exchange Rule. A market participant who exceeds an accountability level may be asked by the Market Regulation Department to provide information relating to the position, including, but not limited to, the nature and size of the position, the trading strategy employed with respect to the position, and hedging information (if applicable). A market participant in excess of accountability levels may be ordered to not further increase positions; comply with a limit set by the Market Regulation department; or reduce any position in excess of the accountability rule.

For further information see the Position Limit Market Regulation Advisory Notice

https://www.cmegroup.com/rulebook/rulebook-harmonization.html

Conclusion

Misunderstood information can deter entry into a market, however, gaining knowledge of this information allows for confident participation.  Increasing volume, growing open interest, multiple venues for execution with deep, transparent markets, and a global warehousing network with rules in place to limit the possibility of queues, makes COMEX Aluminum futures a viable, tradable futures contract.   

Product

Aluminum Futures

Commodity Code

ALI

Contract Size

25 metric tons

Price Quotation

U.S. dollars and cents per metric ton

Minimum Price Fluctuation

$0.25 per metric ton

Contract Listings

60 consecutive months

Trading Hours

6:00 p.m.-5:00 p.m. New York time. Sunday-Friday

Termination of Trading

Third last business day of the contract month

Settlement Type

Deliverable

Settlement Procedures

Settlement Procedures

Position Limits

COMEX Position Limits

Delivery Period


Delivery may take place on any business day beginning on the first business day of the delivery month or any subsequent business day of the delivery month, but not later than the last business day of the current delivery month.

Aluminum Futures Contract Specs - CME Group

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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.

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