Q1 2023 Metals Update

  • 1 Feb 2023
  • By CME Group

Aluminum market capitalizing on liquid Aluminum futures to manage risk

The aluminum market continues to take steps to establish an alternative as CME Group’s Aluminum futures have hit the ground running in 2023. Average daily volume (ADV) of 3.2K contracts and open interest (OI) of 1,968 contracts as of January 23.

This comes on the back of a record year in 2022 where we hit several records including ADV of 1.6K contracts per day, and market participation increased by +158%.

Source: CME Group

In addition, we also hit several strategic milestones including opening new warehousing and expanding warehouse capacity through Grafton, Access World and PGS in Port Klang and Aluminum prices now available on Platts database.

Copper price increases see market participants turn to Copper options

Adoption of Copper options (HX) is at an all-time high. As a result of China recently dropping its COVID-19 policies and providing more fiscal stimulus, we have seen a rally in Copper options.

ADV at the start of 2023 is 10.5K contracts, +700% vs. Jan 2022 (as of Jan 23), with an all-time high OI of 147K contracts (as of Jan 25).

Source: CME Group

Participation in Gold Weekly options increases as gold surges

The price of gold has traded above $1,900 for the first time in over six months. Opposing diving forces have made gold an attractive market to express a shorter-term hedge and activity in Gold Weekly options has seen a substantial upturn. 

Macro data points that typically move gold prices continue to be in play; dollar strength, rising rates, and higher inflation. But the recent ease of travel restrictions in China and move away from a zero-COVID-19 policy provides one counterweight to predominant sentiment of a looming global recession. 

Liquidity in Monday, Wednesday, and Friday expiries has grown to the same level as the monthly contract as gold continues to draw more focus. Last year saw a record 11.3K contracts traded per day across the complex with 22K contracts of open interest.

Source: CME Group

Use North European Steel futures for a cost-efficient hedging tool

Steel market participants seeking a central point of price discovery, price transparency, and risk management use Steel futures for a cost-efficient hedging tool to protect profit margins and minimize risk.

Launched in March 2020, European Steel futures continues to build and go from strength to strength. ADV YTD has increased 618% MTD YoY to 465 contracts, with January on course to be an all-time record. Open interest extends out to December 2023 and stands at 6.9K contracts (as of Jan 23). 

Source: CME Group

Super charged battery metals gearing up for a stellar year after an electric 2022

Both cobalt and lithium contracts have found quick adoption from the marketplace, as the automotive sector seeks to manage commodity price risk in the transition to higher EV production volumes. 

Cobalt, a key component in many EV car battery models, has traded regularly in 2022 and is now considered the primary benchmark for cobalt pricing. Open interest currently stands at above 16K contracts (or 17K tons) and traded on average 68 contracts per day in 2022, including a record 756 contracts on October 11.

Lithium futures activity gathered pace in 2022. Since September, 495 tons of lithium hydroxide has traded, equivalent to $40M in notional value. The physical lithium market is adopting floating price indexation, which offers the possibility to use derivatives for price risk management.

  Learn more on cobalt

  Learn more on lithium

Micro copper making a big statement

Launched in May 2022, Micro Copper has seen adoption from the trading community. ADV in 2023 is 5.6K (as of Jan 23, 2023), +134% vs 2022. Open interest currently stands at 2.2K contracts and extends out to December 2023.

  Learn more on micro copper

Platinum – the critical mineral for energy transition and energy independence

Due to its unique chemical and physical properties, platinum is at the forefront of proton exchange membrane (PEM) applications that hold the key to unlocking the zero-emissions potential of hydrogen. 

The critical need for energy independence is spurring investment in hydrogen, and in turn, increased demand for platinum.

  Read now

First Trades in HMS 80/20 ferrous Scrap

HMS 80/20 Ferrous Scrap, CFR Turkey (Platts TSI) traded for the first time on Wednesday, January 11. 

Our Turkish scrap contract was launched to meet the rising need of industry participants to manage price risk and further expand the portfolio of steel contracts traded at the CME Group. 

Our suite of steel contracts address risk across the steel supply chain, such as steel scrap yard, processor, distributor, merchant, trader, and end-user risk.  

  Read now

HRC Steel futures breaks 1K ADV

U.S. Midwest HRC Steel futures broke the 1K ADV mark for the first time. 1,039 contracts were traded per day on average in 2022, building on the already successful contract. Open interest continues to build, currently standing at 25K contracts (as of Jan 23), extending out to November 2024.

A key driver in the continued growth in this market is the expanding pool of participants. Participation hit record levels, up 28% from the previous year.

Note: Unique participants based on accounts active in the market.

  Learn more on HRC Steel

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Data as of February 1, 2023, unless otherwise specified

View the current version and an archive of the Metals Update online here.