CME Group enters base metals space

Physically delivered aluminum

CME Group to Launch North American Physically Delivered Aluminum Futures

New product will provide global aluminum industry participants with a new North American benchmark for managing price risk

NEW YORK and LONDON, March 18, 2014 /PRNewswire/ -- CME Group, the world's leading and most diverse derivatives marketplace, announced today it will launch North American physically delivered Aluminum futures contracts to begin trading on May 5, 2014, pending all regulatory approvals.

This new contract will build on CME Group’s existing suite of base metals products, including the Aluminum MW U.S. Transaction Premium Platts (25MT) futures contract, which was introduced in April 2012. These new Aluminum futures contracts will offer global aluminum market participants a new tool for managing their exposure to volatile North American prices, while giving them access to physical aluminum at a number of CME Group-approved warehouses across the U.S.  

"Aluminum is an indispensable part of our daily lives and is used in everything from building materials and transportation to packaging and wiring," said Harriet Hunnable, CME Group Metals Products Managing Director. "Our customers want a North American physically deliverable aluminum futures contract from CME Group that provides them with greater transparency. Together with our Aluminum Midwest U.S. Premium contract, this new benchmark will enable industry participants to better hedge their North American aluminum price risk."

These contracts will be 25 metric tons in size and will be introduced at a time when Midwest premium prices have increased more than 50% since the start of the year as a result of growing demand for this industrial metal coupled with supply constraints in the U.S.

"We use aluminum extensively in our packaging and it's one of the single largest commodity price risks we face today as a company and an industry," said Tim Weiner, MillerCoors Global Risk Manager. "We see this North American aluminum contract, which will combine both the underlying price of aluminum along with the premium, as a potentially useful tool to help us eliminate many hedge accounting issues."  

This new benchmark will serve as the price reference for the North American aluminum industry and allow participants to better manage their price risk.

Tri-Arrows Aluminum Inc. Chief Operations Officer David Brown said, "We believe this new aluminum futures contract will give us the ability to hedge aluminum price risk, including the North American premium, further out along the curve than we are able to with existing risk management products today."

The exchange's existing Aluminum Midwest U.S. Premium futures contract is financially settled and has traded the equivalent of more than 16,000 metric tons since the start of 2014.

The new Aluminum futures contracts will be available for trading on the floor and electronically via CME Globex, as well as submission for clearing through CME ClearPort and will be listed by and subject to the rules of COMEX.

 

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