March 11, 2019 / 12:57 AM / 13 days ago

Factbox: Details of seven new LME contracts

(Reuters) - The London Metal Exchange launches seven new cash-settled contracts on Monday, including hot-rolled coil (HRC) steel, alumina and cobalt.

Below are details:

CASH-SETTLED FUTURES

The new cash-settled futures contracts will be structured in line with the LME’s existing cash steel contracts in rebar and scrap.

They will be monthly settled futures listed in U.S. dollars per tonne, extending to 15 months into the future initially. They will be tradeable on the exchange’s Select electronic market and also in the inter-office market.

The contracts will be settled based on the monthly average of a third-party index, except alumina, which will be based on the average of two indices.

The new contracts are due to go live when the exchange’s electronic trading system opens during Asian trading at 0100 GMT.

HOT-ROLLED COIL STEEL

The LME is launching two regional hot-rolled coil (HRC) steel contracts for North America and China, based on Platts and Argus indexes respectively.

The exchange is working on adding another HRC contract for northern Europe.

They will compete with existing HRC steel contracts on the CME’s Nymex exchange for U.S. metal and on the Shanghai Futures Exchange for Chinese material.

ALUMINUM SUITE

The LME will introduce two cash contracts for the premiums consumers must pay when they buy physical aluminum.

They will be based on duty-unpaid premiums for U.S. Midwest and Europe, based on Platts and Fastmarkets indexes respectively.

The exchange has launched physically-settled aluminum premium contracts before, but they were not successful.

The other new LME contract is for alumina, the raw material used to produce aluminum, based on the average of CRU and Fastmarkets indexes.

The CME already has aluminum premium and alumina contracts.

BATTERY/MINOR METALS

The LME already has physically-settled cobalt and molybdenum contracts but it hopes that cash-settled contracts in the two metals will be more successful.

Cobalt is based on the Fastmarkets index while molybdenum tracks the Platts index.

PRECIOUS METAL OPTIONS

After the cash-settled futures are launched, the LME plans to introduce options on gold and silver to complement its futures contracts for the metals.

They will be European-style options, rather than the American-style options used for base metals. European options can only be exercised at the expiry, while American options can be exercised at any time before the expiry.

LITHIUM

In the fourth quarter the LME plans to introduce a contract for lithium, which along with cobalt is key for electric vehicle batteries.

Reporting by Eric Onstad; Editing by Jan Harvey

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