LONDON – The London Metal Exchange (LME) plans to launch around 15 new contracts from next January, including cash-settled cobalt and hot-rolled coil steel contracts, an executive said on Wednesday.
"We will put in place the technical capabilities by November and then we'll launch them from January," Robin Martin, head of market development, told Reuters on the sidelines of the International Derivatives Expo.
The exchange, the world's oldest and largest market for industrial metals, said in March that any launch of a new cobalt contract would not be until the end of 2018 or early 2019.
Martin told a panel discussion that the recent trade tensions including US tariffs on aluminium and steel, bolstered the need for new contracts.
"These sorts of moves cause dislocations in metals prices as you'd expect, and so we're looking to launch ... our regional premium contracts," he said.
The LME already has four regional premium contracts for aluminium, but they are physically delivered and have not been successful. The new ones will be cash-settled, based on reference prices from third-party index providers.
The LME is owned by Hong Kong Exchanges and Clearing.
"We're going to ... also launch other contracts where we've seen some of the historical correlations of certain materials along the metals value chain break down with our reference price. Alumina is a very good example of that."
Another area the LME was targeting was metals involved in the electric vehicles revolution.
"That is going to drive massive structural changes in metals, both in existing metals that trade on the LME ... but also there's a focus on things like cobalt, lithium," Martin said.
"(They are) much smaller markets so it's been difficult to get a real physical delivery market going in our established contracts, so that's why we're looking to use third party reference providers."