LONDON, June 16 The London Metal Exchange (LME)
said on Monday it plans to launch new steel rebar and scrap
contracts and also said it was still committed to its existing
steel billet contract.
The LME, owned by Hong Kong Exchanges and Clearing Ltd
, will also launch its new aluminium premium contract
in the first quarter of next year, Matthew Chamberlain, LME head
of business development, told a presentation.
Chamberlain acknowledged that the LME's existing billet
contract was not functioning properly, but that the exchange was
confident it can become more viable.
The LME will consult with its members over the next few
months before releasing proposed details of the rebar and scrap
contracts, which are expected to be cash-settled versus the
physically settled billet contract.
They would probably not be launched until next year, while a
second phase of contracts may include ones for iron ore, coking
coal and steel coil.
Chamberlain said the current steel billet contract has
started to perform better since the LME has taken two measures:
The contract now has its own load-out queue so it is not stuck
behind long warehouse backlogs for base metals, and the LME has
made it a European contract rather than covering Europe and the
"The market has broadly said this contract is beginning to
perform, let's keep it there, support it and let's build those
(other) contracts around it," he said.
"It's never going to be a huge contract ... but the market
wants us to keep it there as a cornerstone and build perhaps the
bigger volume contracts around it."
He said the aluminium premium contract would be offered for
four regions: the U.S. Midwest, Western Europe, Japan and
Southeast Asia. It would use a monthly settlement, unlike the
daily structure for the underlying LME primary aluminium
contract, he said.
Premiums are paid over the LME cash price to cover the cost
of freight and insurance, and reflect regional demand and
The CME Group Inc launched an aluminium futures
contract last month in a bid to challenge the LME's $51
billion market and went live about two years ago with a contract
for its own aluminium premium contract.
(Reporting by Eric Onstad; Additional reporting by Susan
Thomas; Editing by David Evans and Pravin Char)