LME to launch seven new contracts on March 11

The London Metal Exchange has announced it will launch seven of its new cash-settled futures products on March 11, and has selected Fastmarkets to be the price provider for three of the new contracts.

In total, there will be two new ferrous contracts, three new contracts into the LME’s aluminium suite and two minor metals contracts.

“The introduction of new contracts is a strategically important growth driver for the LME. We believe that these new cash-settled contracts will complement our existing product offering and the simpler settlement mechanism will help lower barriers to market entry,” Robin Martin, head of market development for the LME Group, said.

The exchange will launch a new European aluminium premium duty-unpaid contract settled against Fastmarkets MB’s daily Rotterdam duty-unpaid aluminium premium.

This is in addition to the launch of an alumina index settled against Fastmarkets MB’s daily fob alumina index in a basket alongside CRU, where each index will be given equal weighting.

“The LME alumina contract will be priced using a basket methodology in order to better match the pricing dynamics of the physical alumina market,” the LME said in its announcement.

The exchange will also launch a duty paid US Midwest premium contract settled against Platts.

The LME’s announcement explained that it is introducing cash-settled regional aluminium premium contracts in response to market requests from users who wish to manage their entire aluminium price exposure at a single venue, and that the market has guided it to the indices market-users currently employ.

“The LME understands that the premium pricing market continues to evolve, and has committed to a user-choice model whereby the LME will support the growth of the market by listing complementary aluminium premium indices, should market participants request this,” the LME added.

The LME has not given an update on the previously announced plan to launch a European aluminium duty-paid premium contract and a spot Main Japanese Port (MJP) premium contract this year.

In the minor metals segment, the LME will launch a cash-settled contract for cobalt settled against Fastmarkets MB’s standard-grade cobalt price.

The current physically-settled cobalt price on the LME continues to be employed by some users, therefore the exchange said it would keep the physically-settled cobalt price and support both contracts for as long as this remains the case.

The exchange will also launch a cash-settled molybdenum contract, settled against Platts, which will replace the LME’s physically-settled molybdenum contract.

The LME is also set to launch a lithium contract in the fourth quarter of 2019, and has said it will announce the chosen price provider in the coming months.

Three shortlisted providers have presented proposals, of which Fastmarkets MB is one.

In the ferrous suite, the LME will launch a North American hot-rolled coil (HRC) steel price settled against Platts and a steel HRC fob China price settled against Argus.

Additionally, the LME said it is working to deliver a Northern Europe HRC contract in response to market feedback.

Alice Mason

alice.mason@fastmarkets.com

Published

Alice Mason

January 17, 2019

12:30 GMT

London