Top 4 Industrial Metals for Commodity Trading in 2022

May 9, 2022 04:30 PM ET
Top 4 Industrial Metals for Commodity Trading in 2022

Commodities are some of the most popular assets among traders and investors. Their popularity increased during the commodity supercycle that evolved during the Covid-19 pandemic. At the time, the prices of most commodities were in an upward trend as supply chain disruptions intersected with rising demand. In this article, we will look at the most important industrial metals for day traders. 

Industrial vs. precious metals

Broadly, there are two types of metals in the financial market: industrial and precious metals. Precious metals are rare commodities that are mostly loved for their assumed value. Examples of precious metals are silver, gold, and palladium. In most cases, the price of these metals is usually influenced by the prevailing monetary policies. 

Industrial or base metals are those that are used in the manufacturing sector. They are used as raw materials in the production of important items such as cars, medical equipment, trains, marine items, and even packaging products. 

How to trade industrial metals

There are several approaches to trading industrial metals. First, you can trade options tied to these metals. To do that, you just need to find a good broker that offers these options. Examples of these brokers are Robinhood, TradeStation, Ally Finance, and Interactive Brokers. 

Second, you can trade industrial metals in the form of contracts for difference (CFD). A CFD is an instrument that tracks the pricing of a financial asset. Therefore, when you buy a copper CFD, you will benefit as the metal’s price rises. These CFDs are provided by leading brokers like FxPro and easyMarkets.

Third, you can trade industrial metals in the form of exchange-traded funds (ETF). This is a process where you trade funds that track specific metals. For example, you can trade an ETF like the United States Copper Fund, which holds copper. These funds are offered by leading brokers like Robinhood and Schwab. 

Finally, traders focus on mining stocks. These are companies that mine base metals. The idea is that investing or trading these stocks will give you exposure to the metals directly. 

So, here are the best industrial metals to trade.

Copper

Copper is a leading metal that is often seen as a barometer of the global economy. It is one of the most popular metals in the industry. 

Copper has several characteristics that make it to be used widely in most industries. For example, it is a highly ductile and malleable metal, which makes it possible to bend easily. At the same time, copper has excellent conduction characteristics. It is mostly used to manufacture electrical wires that are used by utility companies. Copper is also used by automobile and aviation manufacturers. 

Copper is found in abundance in several countries. The biggest country in terms of copper deposits in Chile. Other big players are Peru, China, DRC, the United States, Australia, and Russia. In terms of companies, the biggest players are firms like Codelco, BHP, Freeport Mc-Moran, and Southern Copper.

There are several factors that move copper prices. First, copper reacts to global economic growth numbers. In most cases, copper price does well when the global economy is growing. Second, it moves in reaction to events in China. China has become the most important country in the industry simply because it is the biggest consumer. 

Third, copper reacts to the performance of the US dollar. In theory, copper should fall when the US dollar strengthens and vice versa. Finally, activities in specific companies have an impact on copper prices. For example, in 2017, the copper price rose after workers at Codelco went on a strike.

Copper chart

Third, copper reacts to the performance of the US dollar. In theory, copper should fall when the US dollar strengthens and vice versa. Finally, activities in specific companies have an impact on copper prices. For example, in 2017, the copper price rose after workers at Codelco went on a strike.

Aluminum

Aluminum is an important industrial metal that is known for several important characteristics. It conducts electricity and is highly resistant to corrosion. Further, the metal can be cast and machined easily. 

Aluminum is widely used in most industries. For example, it is used in the manufacture of cellphones, automobiles, airplanes, and even packaging materials. The biggest aluminum producers are countries like China, Russia, India, and Canada. 

In terms of companies, the biggest players in the industry are mostly from China and Russia, which makes them risky for investors and traders. Some of the biggest aluminum firms that one can trade and invest in are Rio Tinto, BHP, and Alcoa.

Aluminum price chart

Aluminum is offered as a CFD by a number of brokers. One can also trade it in the form of futures through leading brokers like Robinhood and Schwab. The chart above shows the performance of Aluminum since 2021.

Nickel

The world is in a strong transition lately as demand for electric vehicles rises. In fact, it is estimated that EVs will be dominant in the coming decades. Therefore, many people believe that demand for batteries will push metals sharply higher. This explains why the prices of nickel and other metals have become in focus.

Nickel comes mostly from a small number of countries like Indonesia, the Philippines, New Caledonia, Russia, and Australia. China buys most of the nickel that is available in these countries, making the commodity important in the battery sector. 

Nickel price

The easiest method to invest in nickel is to buy CFDs, which are financial products tied to the metal.

Palladium

Palladium is an important metal that is at the intersection of precious and industrial metals. It is widely used in the automobile industry, where it is used as a catalytic converter. Demand for the metal rose when countries embraced strict emission standards. 

Palladium chart

There are several benefits to investing in palladium, including its volatility and the fact that the metal is provided by most brokers. Its performance is also affected by several catalysts like the Federal Reserve and geopolitics.

Summary

Industrial metals are an important part of the global economy. Unfortunately, most of them are not provided widely by brokers, and their volume tends to be small. In this article, we have looked at some of the most important base metals to trade.


Don't miss: The Best Forex Robots in 2021

Best Forex Robots

Best Forex Brokers