Building on the momentum from 2022, CME Group Aluminum futures and option contracts continued their growth trajectory while establishing a foothold in the physical aluminum trade. Increased participation served as the catalyst for surging volume and open interest levels in 2023, while further proving that CME Group Aluminum products are no longer to be ignored.
Rising Volume and Open Interest
For the third consecutive year, average daily volume (ADV) in Aluminum futures increased by over 190% YoY, and average daily open interest in the contract has increased by more than 350%, YoY.
Individual days of over 10K contracts occurred on 19 separate occasions, with a record of over 20K contracts trading on two separate trading days. Open interest in the contract reached a record high of 5,396 on November 3, 2023, surpassing the previous year’s record high level by over 237%.
Increased Adoption
The number of traders participating in the Aluminum futures market reached record highs in 2023, with over 600 traders compared to 357 traders in 2022.
This increased adoption of Aluminum futures, as an investment and hedging mechanism, has been one of the key contributing factors to the contract’s growth in 2023.
Aluminum Option gaining traction
Launched in 2022, the Aluminum option contract (AX) is proving to be a valuable tool in managing aluminum price risk. Volume in the contract in Q4 2023 has increased by 246% over the same period in 2022, while the average daily open interest surpassed 1,100 in Q4 2023.
Platts begins publishing U.S. aluminum CME-basis all-in price
On April 3, 2023, Platts, part of S&P Global Commodity Insights, began publishing a new U.S. Aluminum CME-basis all in price. The CME-basis all-in price runs alongside other all-in calculations and provides market participants a reference price for those who want to structure commercial contracts using CME Group Aluminum pricing.
Since the start of publication of the new price, through the end of 2023, the Platts U.S. aluminum all-in (basis CME) price has been highly correlated with the existing Platts spot P1020 U.S. aluminum transaction price (MWTP), which consists of the U.S. aluminum premium plus the London Metal Exchange cash price, delivered Midwest.
CME Group Volatility Index (CVOL) now includes Aluminum
The CME Group Volatility Index (CVOL) has added aluminum to its family of volatility indices in 2023. Using CME Group’s proprietary simple variance methodology that assigns equal weighting to strikes across the entire implied volatility curve, CVOL provides a figure that captures volatility at a constant 30-day forward-looking period.
Aluminum’s inclusion in CME Group’s CVOL index joins gold, platinum, copper and silver as available metals for analysis.
United States Commodity Fund (USCF) launches ETF investing in Aluminum
On October 6, 2023, the United States Commodity Fund (USCF) announced the launch of the USCF Aluminum Strategy Fund (ALUM).
"We have been closely monitoring the growth of CME Group Aluminum markets, and these latest milestones align with the launch of our USCF Aluminum Strategy Fund (ALUM), which will invest in CME Group Aluminum contracts," said John Love, President & CEO of USCF Investments. "Investors are increasingly looking for exposure to aluminum and other critical energy transition metals. We applaud CME Group for their commitment to growing their industrial metals markets and providing more opportunities for investors around the world."
CFTC adds Aluminum to Commitment of Traders Report
CME Aluminum futures have been added to the CFTC Commitment of Traders Report as of January 24, 2023 Commitments of Traders | CFTC.
The CFTC Commitment of Traders report provides insight into positions held by market segment. Markets are only included if 20 or more traders hold positions equal to or above the reporting levels established by the CFTC and the respective exchanges. The report is released each Friday afternoon based on open positions as of the preceding Tuesday.
CME Group provides the Commitment of Traders (COT) tool, which is a highly configurable graphical representation of the CFTC’s report.
Expansion of the Global Warehousing Network
CME Group’s Aluminum warehousing network added Gwangyang and Busan in the Republic of Korea as approved delivery locations in 2023, and now includes 27 warehouses in 11 locations as follows:
- U.S: Owensboro, KY; New Orleans, LA; Toledo, OH
- EMEA: Rotterdam, Netherlands; Bilbao, Spain; Antwerp, Belgium
- APAC: Johor, Malaysia; Port Klang, Malaysia; Singapore, Republic of Singapore; Gwangyang, Republic of Korea; Busan, Republic of Korea
The following warehousing companies offer storage services at CME approved locations: Access World, C. Steinweg, Grafton, Henry Bath, Kodiak Resources and PGS.
Conclusion
Aluminum futures and option contracts and the supporting warehousing network continue to grow and progress. Increased participation, volume and open interest throughout 2023 has been a result of continued validation in the financial world as a viable hedging and investment tool.
