Depending on your activity, you may have to buy or sell aluminium on the raw materials market. As with other products listed on this market, the value of aluminium is highly volatile and is influenced by various factors. In order to optimise your transactions on this market and minimise the risks associated with these financial exchanges, it is important to adopt good raw materials management. In order to fully understand the value of aluminium on the markets, we return to this raw material in detail here.
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What are the different aluminium quotation markets ?
As mentioned above, aluminium transactions are mainly carried out on the London Metal Exchange (LME). Officially founded in 1877, this market specialises in the trading of futures contracts on non-ferrous metal transactions.
Thanks to futures contracts, price fluctuation risks are better managed by the players in this market.
Other products such as futures and options are also offered on the LME. At the level of transaction trading, it can take several forms :
By electronic platform
What are the quotation methods for aluminium?
Unlike other futures markets such as NYMEX or ICE, the London Metal Exchange does not have the same product quotation system.
While other futures markets operate with monthly quotes, the LME has a date-based quoting system.
In this market, products are quoted daily with a fixed three-month detail.
What factors influence the price of aluminium ?
The reference value for aluminium transactions is therefore set by the London Metal Exchange (LME). This value is not fixed and may vary significantly depending on a number of factors:
Supply and demand
Value of the dollar
Investor expectations and behaviour
Cost of transport and insurance
For aluminium transactions, all these elements will therefore be taken into account in order to best assess the value and final cost of aluminium. In order to minimise the risk of financial losses, forward contracts are therefore signed between the players in this market.
What is the global evolution of aluminium ?
Aluminium is one of the most widely used raw materials in the world and is therefore the subject of numerous transactions. Most of the production of this material is carried out in China, with Russia and Canada among the main producing countries.
On the raw materials market, aluminium is the subject of numerous transactions that are directly impacted by the various factors mentioned above.
In order to ensure its price for both buyers and sellers, the majority of transactions are carried out through the signing of forward contracts.
What are the advantages of the futures market for aluminium ?
The raw materials market is particularly volatile and the value of individual products can vary significantly over short periods of time.
Faced with these fluctuation risks, players therefore seek to protect themselves as much as possible. Thanks to the futures market, the players involved in a transaction agree on a price with payment and delivery at a later date.
Setting this price thus enables them to protect themselves against possible increases or decreases in the value of aluminium. This type of contract has advantages for both buyers and sellers.
For aluminium sellers, forward contracts give them the assurance of selling their production, even before it is produced, at a fixed price.
In the event that the value of aluminium falls between the time the contract is signed and the actual payment, this will ensure that sellers are not impacted by this devaluation. Conversely, if the price of aluminium increases during the same period, the seller will not be able to benefit from this increase in value.
The forward contract therefore enables sellers to protect themselves against the risk of a loss in aluminium value.
For buyers, forward contracts are also advantageous, since they can negotiate the purchase price of the aluminium beforehand.
This prior negotiation of the price enables them to anticipate a possible increase in the value of aluminium. By signing a forward contract, the buyer is thus assured of the purchase price and thus of the budget required to carry out the transaction.
However, in the event of a drop in aluminium prices, he will not be able to benefit from it.