About Aluminum Futures
Aluminum is used in a large array of products which can range from cans to larger modern structures such as power lines, airplanes, or spacecraft components.
Due to the diverse usage of aluminum, it is traded, bought, and sold in large volumes around the world. Apart from the physical exchange and trade of aluminum, the trading of these base metal futures through contracts can also be achieved with the help of a broker.
As a brokerage firm, Orient Futures Singapore currently provides aluminum futures from SHFE through the QFI scheme, while plans for more exchanges are planned to be released to international traders in the near future.
If you seek to trade other futures, refer to the list of exchanges here or contact us for more information.
Next, this article will take you through key events and 5 things to know about aluminum futures.
5 Things To Know About Aluminum Futures
1. Aluminum Exchanges
Like gold futures, aluminum futures are also traded in the same few main exchanges. The exchanges are the London Metal Exchange (LME), the Commodity Exchange Inc. (COMEX), and the Shanghai Futures Exchange (SHFE).
LME
As the global metal exchange hub, LME contributes to many metal futures contracts such as lme aluminum futures, gold futures, and nickel futures.
For the High-Grade Primary Aluminum LME futures contracts, LME currently offers a contract size of 25 tonnes/lot, while the delivery dates vary for the daily, weekly, and monthly futures. Orient Futures Singapore also provides brokerage services for this futures contract, refer to the specifications here.
In relation to recent events, SMM, a metals information provider, reported that the conflict between Russia and Ukraine meant that metal flows in Russia were increasingly limited. Progressively, these supply-side disruptions and logistical factors are resulting in price movements on the London Metal Exchange.
COMEX
Alternatively, COMEX also offers various metal futures or forwards. It is the primary clearing house for gold, silver, and copper futures, all of which are traded in standardized contract sizes, as well as a mini and/or micro version.
Considering that COMEX is a division of the CME Group, CME also provides updates on the exchange’s aluminum futures trade.
In a recent update, CME listed several reasons why aluminum futures are becoming more relevant, and its network of trading hubs in various countries.
As an example, COMEX currently hosts its current warehouse at various locations including APAC: Johor, Malaysia; Port Klang, Malaysia; Republic of Singapore, Singapore.
Naturally, while housing aluminum is important, offering international access to trade also remains at the helm of Singaporean brokerage services.
SHFE
Lastly, SHFE from China also provides aluminum futures and the recent circular on the participation of Qualified Foreign Institutional Investors on 2nd September has allowed QFI participants to trade in aluminium.
SHFE currently offers a contract size of 5 metric tons/lot and delivery is made on the 15th day of the contract month.
Unlike the other two exchanges, China is a major aluminum-producing country and hedging pressure is always quite high. With the release of the product, more traders can join the trading process which will also help in hedging and managing price volatilities.
2. Demand And Supply For Aluminum
The major suppliers of the aluminum industry are China, India, Russia, and Canada. Amongst these countries, China accounts for 60% of the global market.
These supply-side factors can be affected by disruptions to mining processes such as the Covid-19 pandemic or logistical hiccups.
Another factor that may be important to watch out for is the rising demand for metal.
Aluminum today reports that global aluminum demand will increase by almost 40 percent by 2030. Currently, this growing demand is partially affected by slowing global growth coupled with high levels of inflation which have caused aluminum prices to increase.
Correspondingly, based on information from trading economics, it was recorded that aluminum futures from the London Exchanges were trading at a $2,500 per-tonne level, a level not seen since July 2021.
3. Industrial Trend
The aluminum trade spans multiple industries such as automotive, aerospace, high-rise buildings, electronics, and cans.
Due to the versatility of aluminum and its potential to be used sustainably, demand may also increase for the metal.
As a step towards that sustainable circular economy, the first ALUMINIUM Business Summit was held in 2021. It is highlighted that ambitious climate targets can only be achieved if the players pull in the same direction across the entire aluminum supply chain, this includes China’s Aluminum production factories.
This industry summit equally signifies the importance of industry trends as an indicator of market demand or supply for aluminum. Ultimately, the choice of action will affect future prices.
Therefore, industrial trends should be considered when accessing the market for trade futures too.
4. World Economy
Unmistakably, geo-political conditions of the world dictate the relations of trade blocs which can also affect the price of raw aluminum.
In recent news, the 14th BRICS Summit was held on June 23 and June 24, 2022. Some of the key news from the Ministry of Foreign Affairs, China, include the “Buy BRICS” promotion event that would increase BRICS Initiative on Trade and Investment for Sustainable Development and BRICS Initiative on Enhancing Cooperation on Supply Chains.
This may be a factor for consideration as China is currently producing the largest proportion of aluminum.
Moreover, with more trade in the 4 major countries, China, Brazil, Russia and India within the trade blocs, more futures may be set to open for the international market to hedge risks.
5. Currency Fluctuations
The US currency is the main currency for aluminum or other commodities.
Hence, the value of a strong US dollar may impact the suppliers.
In general, aluminum producers receive fewer dollars for their products when the US currency is strong and more dollars when the currency is weak.
This may in turn affect the prices of aluminum.
Start Trading With Orient Futures Singapore
Being an Overseas Intermediary of Shanghai International Energy Exchange (INE), Dalian Commodity Exchange (DCE), and Zhengzhou Commodity Exchange (ZCE), when foreign clients participate in internationalised futures contracts in these Chinese markets with us, they have direct access to trading, clearing, and settlement. Our parent company, Shanghai Orient Futures, is the largest broker in terms of aggregated volume across the five regulated exchanges in China.
Orient Futures Singapore also currently holds memberships at the Singapore Exchange (SGX), Asia Pacific Exchange (APEX), and ICE Futures Singapore (ICE SG).
We provide premium customer service at an affordable cost to all our clients. Our team will be there for you 24 hours on trading days to provide a one-stop portal for all your trades, with simple processes and an intuitive user interface that has low or near-to-zero latency.
