InvestorQ : How is the local price in the Indian markets determined for aluminium?
simran Kaur made post

How is the local price in the Indian markets determined for aluminium?

Answer
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Dilmini Mercia answered.
2 years ago


Like in case of most industrial and precious metals, the international price on the LME serves as the benchmark. The aluminium futures prices are quoted exclusive of all levies and charges. These charges will have to be borne by the buyer at the time of taking the physical delivery of the commodity. As a result, the local price almost matches closely with the international price. Let us consider the above example.

Assume that the Bloomberg LME prices is quoting aluminium at the price of $1910.50/MT. If you were to convert this into INR terms at the current exchange rate of Rs.64, then the INR price will be INR 121,317 per MT. Since the aluminium futures on the MCX are quoted on a per KG basis, the above calculation will translate into Rs.121.32/KG. This is approximately the price at which 1 KG of aluminium is quoting on the MCX. Thus it is clear that due to the price of aluminium futures being quoted exclusive of charges and taxes, the global prices and the local prices are normally at par. Therefore, if you are long on aluminium futures on the MCX, then you will not only benefit from the LME prices of aluminium going up but also from the INR weakening against the US dollar. Please note that all these numbers are for illustration and can change with the assumption of prices and exchange rates.