Demystifying COMEX Aluminum

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 are making it increasingly difficult for the trading community to ignore the contract.

As more attention is drawn towards COMEX Aluminum futures, some misconceptions about the contract must be clarified.

Misconception #1: COMEX Aluminum futures is a regional duty-paid contract.

Clarification: 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 August 2021, warehouses are 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 August 2021):

  • US ‒ Owensboro, KY; New Orleans, LA; Toledo, OH
  • EMEA – Rotterdam, the Netherlands; Bilbao, 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) and is a duty-paid contract with warehouse locations only in North America.

Misconception #2: The market will not benefit from another Aluminum futures contract.

Clarification: 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 operate 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) – this is to prevent the warehouse from meeting their load out obligation with eligible metal and delaying the load out of registered metal.
  • 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 in 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.

Misconception #3: Liquidity is insufficient to trade.

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

Trading in COMEX Aluminum futures is available on-screen through Globex or through the brokered block market and cleared via CME Clearport, giving participants multiple venues at which to execute trades. 

Source: CME Group

The ability to execute and on-screen transparency are reflected through increased average daily volume (ADV) and open interest (OI) which has reached yearly high levels in August 2021.

Source: CME Group

Misconception #4: Liquidity seems to change at random times during the month.

Clarification: 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 fifteenth 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 2021… …the active/lead contract month is…
Jan 4-Jan 14 Mar-21
Jan 15-Feb 12 Apr-21
Feb 16-Mar 12 May-21
Mar 15-Apr 14 Jun-21
Apr 15-May 14 Jul-21
May 17-June 14 Aug-21
June 15-July 14 Sep-21
July 15-Aug 13 Oct-21
Aug 16-Sept 14 Nov-21
Sept 15-Oct 14 Dec-21
Oct 15-Nov 12 Jan-22
Nov 15-Dec 14 Feb-22
Dec 15-Jan 14 '22 Mar-22

On-screen depth and liquidity on spreads to active contract allow participants the ability to roll positions forward when necessary.

Source: CME Group

Misconception #5: Position limits will restrict implementing trading strategies.

Clarification: Strict position limits in COMEX Aluminum futures only apply to the spot month.

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). Failure to supply the requested information may result in an order to reduce such positions, in addition to disciplinary action.

https://www.cmegroup.com/rulebook/files/cme-group-Rule-562.pdf

Conclusion

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

Product Aluminum Futures
Commodity Code ALI
Contract Size 25 metric tons
Price Quotation US 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/Eastern 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


If you would like to speak to us, please email metals@cmegroup.com.

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