General presentation of stock market aluminium :
First, we will take a closer look at aluminium as a stock market asset with a more detailed presentation of this metal.
First of all, it should be remembered that aluminium is a metal that is used in the aeronautics, transport, construction and chemical industries as a catalyst.
Aluminium is extracted from an ore called bauxite, which is mainly produced in Australia, China, India and Guinea. Several tens of millions of tonnes of aluminium are produced each year worldwide.
Of course, as we will see in more detail below, the price of aluminium is influenced by various external elements and factors such as general macro-economic conditions, since the demand for aluminium depends to a large extent on the production of durable goods in terms of its industrial use. Between 2008 and 2009, a significant drop in the price of this metal on the stock exchange was observed due to the crisis that affected this sector.
Aluminium is mainly traded on the London Metal Exchange, which is the London market specialising in exchange metals. Of course, derivatives are also continuously quoted on this market, including futures, ETCs and options.
Aluminium is also quoted in dollars per tonne and physical aluminium is mostly traded by manufacturers.
The main uses of aluminium in the world :
To understand what can influence the price of aluminium on the stock market, it is also necessary to know who uses it and why.
- Aluminium has many uses and is frequently used in the transport industry for the production of cars, planes, trucks, trains and ships. It is also used in the food packaging industry.
- The construction industry with the production of doors, windows or gutters also consumes a lot of aluminium, as do consumer goods in the manufacture of appliances or kitchen utensils for example.
- Aluminium is also used in electrical wires despite its lower conductivity compared to copper and because of its lower price.
- Finally, aluminium is also useful for the technology sector as it is widely used in electronics.
Market and quotation of stock exchange aluminium :
As we have seen above, the main exchange trade in aluminium is on the LME, where several tens of millions of futures and forward contracts are traded each year.
Historically, aluminium experienced strong growth on the stock market at the beginning of the century, but this rise was halted by the crisis in the automotive and real estate sectors in 2008. Since then, the high of USD 3,000 per tonne reached in 2006 has never been touched again. At that time, it was the drop in world production that caused the price to fall, with a drop in production and surplus stocks. The fall was 65% for this metal, which is the biggest fall in history.
Since then, the price of aluminium has fortunately recovered some of the points lost, but it has still not managed to return to pre-crisis levels. Moreover, it has been weakened by the Covid-19 crisis in 2020 with a new drop in industrial production.
Aluminium trading takes place on the over-the-counter market as well as on regulated markets. Here again, the London Metal Exchange is the reference exchange for aluminium and other metals. Aluminium is traded in the form of contracts with a size of 25 tonnes per contract. The quotation of this value is that of one tonne in US dollars with a minimum variation of $0.25.