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A Market Overview of Metal Commodities

March 15, 2018 by Daniels Trading| Futures 101

In commodity futures markets, gold, oil and corn typically grab the headlines, especially whenever there’s a surge in demand, concerns over supply or worries about political developments.

Meanwhile base metal commodities — such as copper, aluminum, zinc, tin and lead — are perceived by some investors as the dowdy cousins in the sector. But in reality, the metals, led by copper, are the workhorses of the global economy. They are often in tremendous demand, which also presents opportunities for the serious investor.

Nonferrous metals are found in relative abundance throughout in the world and are dug up and refined by a string of mining companies. But a strike or other supply issues at a major producer can sometimes spark panic in the markets.

Basic Training for Futures Traders

The ebb and flow of metal demand provides a great window into the health of the global economy. In the early to mid-2000s, for example, the price of copper surged as China’s economy boomed because the country needed to import more of the metal to feed its roaring industry. Copper, along with most other commodities, plunged during the 2008 recession as demand collapsed, however.

Despite being traded for centuries, copper, lead and tin are still the main building blocks for industry. Other metals, such as aluminum, zinc and nickel, are the relative newcomers but are crucial in a range of modern manufacturing processes.

Metal commodities are traded around the world, paced by the London Metal Exchange, or LME. They are also traded on the New York Mercantile Exchange, which is part of the CME Group, and the Central Japan Commodity Exchange.

Copper

Copper, known as the red metal, is said to be the first metal ever traded. Chile is the world’s biggest producer, and China is its biggest consumer. It may not be hoarded or prized like gold, but it is sought after because of the wide variety of applications for copper. The metal is a good conductor of electricity and does not corrode, making it ubiquitous in wiring, plumbing, generators, motors and cooling.

On the CME, copper’s contract size is 25,000 pounds and is traded in U.S. dollars per pound. On the LME, prices are in quoted dollars, per metric ton.

Aluminum

Aluminum is one of the most highly traded based metal commodities, and China is both a leading producer and consumer of the metal. The U.S. and Russia are also major producers of the aluminum.

A CME aluminum contract consists of 55,000 pounds and is quoted in dollars, by the pound. Aluminum, the third most abundant element on earth, is used in automobiles, planes, and in the housing sector.

Nickel

Nickel is a volatile commodity on global markets but is more thinly traded than the other base metals. Once again China is the dominant consumer for the metal, which is produced in several countries, including Canada, China, Australia and Russia.

Nickel is used for making stainless steel and other corrosion-resistant alloys.

Investor Education

Like any market, investors need to do their research and talk to professionals before trading in metals futures. It’s essential to know what is driving prices up or down, and each the metals can be moved by factors unique to its market.

The sprawling global metals futures sector is not for everyone due to the significant risks and rewards involved. Investors should always consider their full financial picture and seek professional advice before entering such markets. Contact us for a free consultation and expert advice about investing in metal commodities and other futures markets.

Basic Training for Futures Traders

Filed Under: Futures 101

About Daniels Trading

Daniels Trading is division of StoneX Financial Inc. located in the heart of Chicago’s financial district. Established by renowned commodity trader Andy Daniels in 1995, Daniels Trading was built on a culture of trust committed to a mission of Independence, Objectivity and Reliability.

Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

© 2023 StoneX Group Inc. All Rights Reserved

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Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

© 2023 StoneX Group Inc. All Rights Reserved

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