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The Shanghai Futures Exchange has launched the world’s first derivatives contracts dedicated to a recycled commodity, introducing futures and options trading for cast aluminium alloy.
On Tuesday 10 May, the exchange introduced seven futures contracts with expiration dates ranging from November through May next year, followed by the first options contracts of their kind later in the evening.
“As China’s first renewable commodity futures and options variety, the listing of cast aluminium alloy futures and options can give play to the functional role of the futures market and effectively promote green and low-carbon transformation of China’s non-ferrous metals industry,” said Lu Dongsheng, chief executive of Shanghai Futures Exchange.
The global market for financial derivatives based on recyclable materials is still in its nascent stages. Previous attempts have largely focused on ferrous scrap; the London Metal Exchange has traded over 3.25 million metric tons of ferrous scrap futures since launching those contracts.
Cast aluminium alloy, the focus of Shanghai’s new contracts, is produced primarily from recycled scrap aluminium that is melted and alloyed with copper, silicon and other elements before being cast into semi-finished products. The material is widely used across the automotive, motorcycle, and mechanical equipment industries.
China’s strategic choice reflects its dominance in the global recycled aluminium market. The country is both the world’s largest producer and consumer of cast aluminium alloy, with annual production reaching approximately 6.2 million tonnes in 2024. Industry projections suggest China’s recycled aluminium output could exceed 18 million tonnes by 2030.
The launch comes amid broader growth in Shanghai’s commodity derivatives market, with trading volumes surging across several contracts. Natural rubber futures have posted a 31.7% increase in turnover year-on-year, whilst petroleum asphalt futures saw a 123.6% surge.
“Global economic and geopolitical risks have escalated significantly. In particular, the current turbulent trade environment has created substantial operational uncertainties for real businesses, leading to a sharp increase in hedging demand,” said Li Qiang, director of Xinhu Futures Research Institute.
Exchanges worldwide have been grappling to meet the increasing demand for sustainable investment products and risk management tools in the circular economy. Municipal and commercial recycling industries often fail to efficiently identify new applications for discarded materials as inputs for productive processes: the United States Environmental Protection Agency (USEPA) reports that 48.2% of the 292.4 million tonnes of municipal solid waste generated in the US in 2018 was recyclable, but only 48.9% of that eligible material was actually recycled. Theoretically, exchange-traded futures on recycled materials could work as a financial strategy to increase recycling rates.
