What is Aluminium?
Aluminium is a soft, silvery-white, non-magnetic, ductile metal, chemical element and is the third most abundant element after oxygen and silicon. Aluminium is the most abundant metal in the earth’s crust and makes up about 8% by mass of the earths crust.
The most prominent ore of aluminium is bauxite. Aluminium sulphates are an ingredient in many popular consumer goods including medicine and cookware products.
Aluminium is a long-life product and it’s estimated that around 75% of all aluminium that has ever been produced is still in use for it’s original purpose or product.
Uses of Aluminium
Aluminium has become a very prominent metal with the transport industry as the need for long lasting and light weight products and components. It is common within engine parts including engine blocks and cylinder heads. Aluminium is emerging as a preferred metal for power transmission lines.
Aluminium is commonly recognised within the beverage industry as the standard delivery for drinks and allows consumers to then contribute to the recycling process after use. Aluminium is used in food and pharmaceuticals for packaging due to it not releasing any taste or toxins.
Risks of Aluminium
Like any futures contract, there is always the possibility that the underlying asset i.e. aluminium will move in the opposite direction to which you anticipate. For example, you take a long position expecting the price of aluminium to rise and it falls.
With any commodity, supply and demand will affect the price. This risk should be monitored on a regular basis and adjusted to suit your risk parameters.
Mining of metals has an inherent risk with the level of costs associated with extracting the product from the earth. This can include but not limited to the cost of oil to fuel machinery, cost of labour or new tax regulations being implemented.