Base metals are non-ferrous industrial metals including copper, aluminum, lead, nickel, tin and zinc.

Common Usage of Base Metals

Base metals appear in industrial and commercial applications.

  • Copper - commonly used in wiring in electrical equipment due to its excellent conductivity.
  • Aluminum - commonly used in the transportation industry for use in aircraft, cars and bicycles. Being largely resistant to corrosion, aluminum is also used in the food and beverage industry for drinks cans, kitchen foil and packaging.
  • Lead - is soft, highly malleable and ductile and is predominantly used commercially in the manufacture of batteries.
  • Zinc - often used in alloys, where a metal is made by combining two or more metallic elements to give improved properties, creating brass by combining zinc with copper. Zinc alloys are often used in industries such as shipbuilding and commercial uses in cars, electrical components and household fixtures.

Who Trades Base Metals?

Different types of firms are actively engaged in Base Metals trading for a variety of reasons. Some firms are hedging a physical price exposure due to their involvement in the supply chain of the metal. Others trade Base Metals as an investment asset.

Trading Base Metals

There are two main ways to manage risk in the base metals markets: by trading futures and options with CME Group, or by trading forwards over the counter. Our base metals futures and options cover a wide range of products and are either physically-delivered or cash-settled using price reporting agency indexes or assessments.

Futures contracts are standardized contracts for the purchase and sale of financial instruments or physical commodities for future delivery on a regulated commodity futures exchange.

Forward contracts are customized contracts between two parties to buy or sell assets at a specified price on a future date and are privately negotiated and traded over-the-counter.

Futures and forwards contracts are similar in nature but note the benefits of trading futures over forwards.

Futures Contracts Forwards Contracts
Standardized Changeable
Exchange-traded Over the counter
Limited market credit risk Higher market and credit risk

Settlement price fixed
(last trading date or monthly average)

Settlement price agreed at initial trade date

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ACCREDITED COURSE

In case you didn’t know, the CFA Institute allows its members to self-determine and report continuing education credits earned from external sources. CFA Institute members are encouraged to self-document such credits in their online CE tracker. CME Institute offers a variety of courses, webinars, and white papers to support your professional education.

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