Aluminium: the lightweight metal with heavyweight potential in the commodity market, is amongst the most frequently used metals which are being traded as a commodity on many international marketplaces.

Aluminum’s low density which is one of its fundamental characteristics makes it the perfect material for a variety of uses, including transportation, building, packaging, and electrical power transmission.

The metal is used in the construction of automobiles, aircraft, and trains in the transportation sector.

It is also extensively used in the construction sector for the production of windows, doors, and other building components. In the packaging sector, metal finds usage in the fabrication of cans, foils, and other packaging materials.

In addition to this, aluminium is very recyclable which minimizes its influence on the environment and helps preserve natural resources.

Factors affecting Aluminium prices

Aluminium price is influenced by a wide range of factors such as supply and demand, production costs, and overall economic conditions. For example, the status of bauxite mining and refining, production costs, and general economic conditions have an impact on the availability of aluminium and thus on its price.

Fluctuations in energy prices also have an impact on aluminium prices because of the high energy-intensive nature of the mining sector.

In addition to the above factors, other parameters of the global economy, such as interest rates, currency exchange rates, and political unrest, can also have an impact on aluminium pricing.

Trading in aluminium

London Metal Exchange (LME), the New York Mercantile Exchange (NYMEX) and the Shanghai Futures Exchange (SHFE)  are a few of the major exchanges which deal in aluminium. On the Indian front, aluminium futures contracts are available for trading on Multi Commodity Exchange (MCX).

Futures contracts are arrangements to purchase or sell a predetermined amount of a commodity at a predetermined price at a future date.

Over-the-Counter (OTC) Market: In addition to trading on exchanges, buyers and sellers can also conduct direct negotiations on the over-the-counter (OTC) market, where aluminium trading takes place.

Aluminium price: On a roll in 2023

Since the beginning of 2023, aluminium prices have seen an upsurge of more than 9%. The price rise is due to the expectations for a more robust demand and concerns about supply constraints.

Concerns about a worldwide recession have also been eclipsed by China’s major efforts to strengthen its economy and put an end to the harsh coronavirus-induced regime.

On the supply side, last year’s output saw reductions from several significant European smelters because of a spike in power prices. This gave bulls even more hope after Russia invaded Ukraine during which the commodity reached an all-time high of over 4,100 USD/T.

In essence, aluminium is a versatile and frequently utilized metal traded as a commodity on international markets. Several elements, such as supply and demand, manufacturing costs, and general economic conditions have an impact on the price of aluminium. Aluminum may therefore be a volatile but possibly lucrative investment for traders.