Aluminum Premiums Flourish as Electric Vehicles Gain Traction

  • 13 Feb 2020
  • By Jon Lynch
  • Topics: Metals

With the increased adoption of electric vehicles (EV) in the US and the drive towards longer battery ranges, so will increase the demand for aluminum and the relevance of Aluminum Premium futures offered by CME Group.

Aluminum consumption in United States totaled 4.9 million metric tons in 2018.  Of that total, approximately 40% was in transportation applications. Use of aluminum in automobiles has grown continuously for 40 years and is second only to steel as the most used material in vehicles.  When striving for longer range and higher fuel efficiency, aluminum’s light weight has made it the material of choice in the automobile industry.

In 2015, the Aluminum Association estimated the average aluminum content in cars to be 397 lbs., and projects that number to increase to 565 lbs. by 2028.  This rise can be attributed to the lightening of electric vehicles in an effort to extend battery ranges as well as optimizing fuel efficiency in traditional combustion engine vehicles.

According to the Edison Electric Institute (EEI) and the Institute for Electric Innovation (IEI), by 2030, the number of electric vehicles on the road in the US will reach 18.7 million, up from just over 1 million at the end of 2018.  

Source: The Edison Foundation Electric Vehicle Sales Forecast Report November 2018.
https://www.edisonfoundation.net/iei/publications/Documents/IEI_EEI%20EV%20Forecast%20Report_Nov2018.pdf

With this projected growth in aluminum usage in the US automotive industry, and with a large concentration of the automobile industry in the US Midwest, COMEX Aluminum MW US Transaction Premium (Platts) futures (AUP) and Aluminum MW US Transaction Premium Platts (25MT) Average Price option (ALO) contracts can help to mitigate the Midwest delivery premium price risk.

Total volume traded across all aluminum premiums during Q4 2019 was a record 58,123 contracts, the highest quarterly tally on record. 

Source: CME Group. Data through Feb 7, 2020

ADV growth across the COMEX Aluminum premium suite has continued into 2020.

Source: CME Group

Volume transacted electronically in Q4 2019 across all Aluminum Premium futures contracts was the strongest since Q1 2016, with a record amount of volume in US Midwest Aluminum Premium (AUP) futures contract being transacted on-screen.

Access robust markets electronically, or in the brokered market.

Aluminum MW US Transaction Premium Platts (25MT) Average Price option (ALO) is beginning to gain traction, as first trades have been transacted during Q1 2020 and cleared via CME ClearPort.

Aluminum Premium contracts offered at CME Group continue to gain relevancy in the aluminum industry and provide a mechanism to hedge price risk regardless of delivery region.

Learn more about our Aluminum Premium contracts:

AUP - Aluminum MW US Transaction Premium (Platts) futures

AEP - Aluminium European Premium Duty-Unpaid (Metal Bulletin) futures

EDP - Aluminium European premium Duty-Paid (Metal Bulletin) futures

MJP - Aluminum Japan Premium (Platts) futures

ALO - Aluminum MW US Transaction Premium Platts (25MT) Average Price option

 

If you would like to discuss CME Group's suite of Aluminum products please contact metals@cmegroup.com