LME Aluminium

SETTING THE GLOBAL STANDARD

LME Aluminium launched in 1978 and has since become the London Metal
Exchange’s (LME) most liquid contract. Backed by the LME’s strong ties with
the physical industry, traders can benefit from tight spreads, a deep order book
and a forward curve out to 10 years.
Aluminium, in its natural state of bauxite, is the most abundant Aluminium production by region 2016
metal on earth, accounting for approximately 8% of its crust. It is (million metric tonnes)
characterised as a soft, lightweight, durable and malleable metal.
Although the use of aluminium dates back to ancient Greek and
Roman times, it was not until 1825 that the metal was extracted
and used in the form we know it as today.

Aluminium has wide-ranging uses because of its resistance to

corrosion. The metal does not react with air because it has a thin
protective coating of aluminium oxide preventing further oxidation
– this is why aluminium is used in most household appliances.
When mixed with other metals, aluminium helps make them more
lightweight, resulting in an increase in use in the aerospace and
transportation industries in particular. It is also used as a substitute
Source: International Aluminium Institute and Aluminium Federation
for copper in electrical wiring as it is a good conductor of electricity.
Aluminium consumption by region 2016
Main industries that use aluminium are: (million metric tonnes)
• transport
• packaging
• construction
• machinery and equipment
• consumer goods
• electrical engineering

Theoretically, aluminium is 100% recyclable. According to the

Aluminium Association, recycling one aluminium can saves enough
energy to listen to a full album on an iPod. Source: International Aluminium Institute and Aluminium Federation

Aluminium production process

Electrolytic Foundry
Crushing Digestion Precipitation reduction Casting alloys Rolling Extrusion

Al +
Bauxite Alumina Reduction Primary Aluminium alloys Recycling
mining process aluminium
Bauxite is a Bauxite is crushed, This involves is cast into ingots Aluminium is It can be
mineral rich mixed with caustic introducing an and shipped shaped into its re-melted and
in aluminium soda, ground and electric current to around the world required form for recycled due to
heated to produce the alumina in a for various uses use in products its corrosion
alumina reduction cell to break e.g. car parts, resistant
up the oxygen and aircraft etc properties
aluminium atoms,
known as the
Hall-Heroult process

LME price
Trading aluminium on LME
Trading LME Aluminium can help diversify your portfolio. All of LME trading venues and prices
our base metals contracts have close ties with the physical market. Telephone – The Exchange supports an inter-office market
The prices discovered on the LME are used the world over in between LME members which operates 24 hours a day.
physical contracts, and because they can be physically settled – All telephone trades are matched and cleared through our
using the LME warehouse network – LME prices converge with matching platform, LMEsmart, and clearing house, LME Clear.
the physical market.
Electronic – LMEselect is our electronic trading platform,
The interaction on the LME between the physical and financial which integrates with member trading platforms via a FIX API,
communities provides highly liquid and deep order books with either from member sites or via data centres to facilitate low
tight spreads. latency trading strategies. LMEselect is open for trading between
01:00 and 19:00 (London time). LMEselect is only available to
The LME’s unique prompt date structure allows you to trade daily
LME members but clients of LME members can access it via
out to three months, weekly out to six months and monthly out to
member systems or member-sponsored Independent Software
ten years.
Vendor (ISV) platforms (see below for more details).
LME Aluminium facts The Ring – The Ring, our open-outcry trading floor, is central to
• Lot size: 25 metric tonnes the process of price discovery. Each LME metal is traded in
• Tick value: $12.50 highly liquid five-minute Ring sessions, which are themselves
• Cost to tick ratio: 0.216 representative of global supply and demand. Aluminium is traded
• Contract types: Futures, Options, TAPOs, Monthly Average on the Ring at these times: 11:55-12:00, 12:55-13:00, 15:15-15:20,
Futures, LMEminis and HKEX London Minis traded on HKEX 15:55-16:00 and ceases trading at 16:45 (London time).
derivatives platform.
Prices – The LME Official Price for aluminium, discovered on
the Ring between 12:55 -13:00, is used as the global reference.
Useful reports Contracts for physical material across the aluminium value
LME Aluminium trading volumes, price and stocks data can be
chain will typically use the LME price plus a regional premium
found on our website lme.com/reports.
and, depending where they fit in the supply chain, an additional
Get real time and historical LME trading data from any of our premium value. The LME Aluminium Closing Price, discovered at
licensed distributors by visiting: lme.com/licenseddistributor 16:45, is used for margining and valuation purposes.

Get aluminium-specific data: lme.com/aluminium ISVs

Members and their clients may choose to access LMEselect
via member-sponsored ISV platforms. Client traffic passes
through an ISV pre-trade risk engine endorsed and fully
controlled by the sponsoring member’s compliance team.
The following ISVs have passed LME conformance tests for
order routing applications connecting via the LMEselect
API for LME Aluminium:
Cunningham Trading

Greeksoft Technologies
FlexTrade UK Limited
Trading Technologies

SharpPoint System

EPAM Systems, Inc

Trading Screen Inc

Software Technology
FFastFill Europe

Redline Trading
International Inc
Patsystems UK

ObjectTraining
Stellar Trading

Shanghai Feishu
FIS (SunGard)
RTS Realtime

Systems LLC
Technology
ATPlatform

Ion Trading

Fidessa plc

CQGT LLC
Solutions
OnixS.biz

Omnesys
Systems

Systems

E-Sunny

PVT. LTD
Limited

Limited

Ullink
Co. Ltd

KCG

Contracts

3M

3rd Weds

3rd Weds -
3rd Weds

LME
options
LME Aluminium trading data
Average daily volume 300,000
Futures Options TAPOs Options and TAPOs %ages (RHS)
9%
Daily volume for LME Aluminium averages
over 200,000 lots per day. LMEselect 250,000 8%

accounts for about 40% of all market 7%

traded volume. 200,000
ADV (Lots) 6%

150,000 5%
4%
100,000
3%

50,000 2%
1%
0
0%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Note: 2017 is H1 2017

Aluminium

3 Month price and volatility 3,500 Aluminium 3M price Volatility % (RHS) 70

The 3 Month (3M) price represents
the price agreed to settle or deliver 3,000 60
material three months from the time
that the price is agreed and concentrates 2,500 50
liquidity on one day.

Volatility % (RHS)
2,000 40
US dollars ($)

Volatility is an important parameter

for some participants as it can often 1,500 30
determine the level of involvement in
a financial instrument. 1,000 20

500 10

0 0
05

06

07

08

09

10

11

12

13

14

15

16

17

18

19
20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

Futures Options TAPOs Options and TAPOs %ages (RHS)

160,000
9%
140,000 8%
3rd Wednesday price LME Aluminium 3W price LME Aluminium 3W ADV (RHS)
35,000
120,000 7%
3rd Wednesday contracts are monthly 3,000

futures that exist within the current 30,000

100,000 6%
($) (Lots)

2,500
prompt date structure for all major LME 25,000 Aluminium 5%
80,000
contracts expiring on the 3rd Wednesday 2,000
ADV

20,000 4%
60,000
US dollars

of each month.
Lots

1,500
3%
15,000
40,000
2%
1,000
10,000
20,000
1%
5,000 500
0
0%
0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
0
JAN MAY SEP JAN MAY SEP JAN MAY SEP JAN MAY SEP
2015 2016 2017 2018

Zinc

Aluminium
12,000 Zinc 3M price Volatility % (RHS) 120

10,000 100
3M to 3rd Wednesday spread 40
This is the spread between the 3M rolling 30
forward contract and a monthly futures

Month 2 – Month 3, US dollars ($)

20
contract or an adjustment of a position
from the daily expiry (three months 10
forward) into monthly expiry. 0

-10

-20

-30

-40

-50
07

08

09

10

11

12

13

14

15

16

17
20

20

20

20

20

20

20

20

20

20

20
1/

1/

1/

1/

1/

1/

1/

1/

1/

1/

1/
2/

2/

2/

2/

2/

2/

2/

2/

2/

2/

2/
Aluminium
Calendar spread 30
3rd Wednesday to 3rd Wednesday
20
spreads are calendar spreads used
($) 2 – Month 3, US dollars ($)

for rolling a position from one month

10
to another.
0

-10
30

20
-20
Month

10
-30
Month 2 – Month 3, US dollars

-10
-40
-20
07

7
00

00

01

01

01

01

01

01

01

01

-30
20

2
1/

1/

1/

1/

1/

1/

1/

1/

1/

1/

1/
2/

2/

2/

2/

2/

2/

2/

2/

2/

2/

2/

-40

-50

-60

-70
LME Aluminium arbitrages 2,800 LME 3M SHFE (EX VAT 17%) MCX
Regional prices for aluminium are Aluminium
2,600
7

7
00

00

00

01

01

01

01

01

01

01

01

impacted by different factors including

/2

/2

/2

/2

/2

/2

/2

/2

/2

/2

/2
1

2,400
1

economic, physical and logistical

2/

2/

2/

2/

2/

2/

2/

2/

2/

2/

2/

influences. Traders can arbitrage the 2,200

differences in aluminium price on the
US dollars ($)

2,000
Shanghai Futures Exchange (SHFE)
and the Multi Commodity Exchange 1,800

of India (MCX). 1,600

Zinc
1,400

1,200

1,000
20J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J
2016 2017 2018 2019
15
10
dollars ($)

5
0
LME Aluminium contract specification
Contract specification LME Aluminium

Contract names and codes LME Aluminium (AH)

Contract type Futures

Delivery type Physically settled

Lot size 25 metric tonnes

Price quotation US dollars per metric tonne

Clearable currencies US dollars, Japanese yen, sterling, euro

Trading venues Ring, LMEselect and inter-office telephone

Ring: 11:40 - 17:00 London time

Trading hours LMEselect: 01:00 - 19:00 London time
Inter-office: 24 hours a day

Daily: out to 3 months

Contract period Weekly: 3 out to 6 months
Monthly: 7 out to 123 months

Venue Outright Carries

Minimum price fluctuation (tick size) per Ring $0.50 $0.01
metric tonne LMEselect $0.50 $0.01
Inter-office $0.01 $0.01

Termination of trading Up until the close of the first Ring the day before the prompt date

Margining Discounted Contingent Variation Margin applied

For more information about LME Aluminium please visit our website at
lme.com/aluminium or get in touch with the team: sales@lme.com
 © The London Metal Exchange (the “LME”), 2017. The London Metal Exchange logo is a registered trademark of The London Metal Exchange.
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of the Information, neither the LME, nor any of its affiliates makes any warranty or representation, express or implied, or accepts any responsibility or liability for, the accuracy, completeness, reliability or
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consequence, decision, action or non-action based on or in reliance upon the Information. The Information does not, and is not intended to, constitute investment advice, commentary or a recommendation
to make any investment decision. The LME is not acting for any person to whom it has provided the Information. Persons receiving the Information are not clients of the LME and accordingly the LME is not
responsible for providing any such persons with regulatory or other protections. All persons in receipt of the Information should obtain independent investment, legal, tax and other relevant advice before
making any decisions based on the Information.
LME contracts may only be offered or sold to United States foreign futures and options customers by firms registered with the Commodity Futures Trading Commission (CFTC), or firms who are permitted to
solicit and accept money from US futures and options customers for trading on the LME pursuant to CFTC rule 30.10.
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