Futures
LME Launches New Aluminum, Scrap & Rebar Contracts
Written by Sandy Williams
November 23, 2015
The London Metal Exchange announced November 23 the launch of new ferrous and premium contracts. LME Aluminum Premiums, LME Steel Scrap and LME Steel Rebar are the first new contracts to be offered by the LME in more than five years.
The new contracts are designed to complement the existing ferrous contract for LME Steel Billet and are a response to market demand.
The new Scrap and Rebar contracts will be traded on LMEselect, allowing industry participants to reduce their risk exposure by hedging more steps in the steel production process. The contracts are cash-settled against physical Turkish scrap and rebar price indexes.
According to LME, “The combination of steel billet with our new scrap and rebar contracts delivers the optimal balance between physically-settled and cash-settled contracts. Maintaining a physically-delivered billet contract helps to ensure price convergence, and will act as the core of a suite of products which can then be cash-settled, enabling the market to trade spreads back to the billet contract. This benefits our physical customers as it allows them to hedge every step of the value chain, whilst also giving financial players the opportunity to arbitrage between different stages of the chain.
The Aluminum Premiums are physically settled and allow participants to hedge the regional “all-in” price to insure the material is available in a non-queued LME warehouses at a convenient location.
“The contracts will be traded across all LME venues, including in price-discovery sessions on the Ring, which will meet the market’s stated desire for exchange-discovered regional premium pricing,” said LME.
“Today’s announcement highlights the LME’s new approach to market engagement,” says Garry Jones, CEO of the LME. “This has been an extremely customer-focused product launch, and we have collaborated with participants throughout the metals value chain to ensure we have created contracts that people want to trade.”
More information can be found at the LME website.
Sandy Williams
Read more from Sandy WilliamsLatest in Futures
Nearby HR futures pull back as 2024 nears end
After experiencing a rally ahead of the 2024 election, the nearby part of CME HRC futures complex has softened as we approach year-end. Meanwhile, the forward positions (second half of 2025) have remained supported and largely unchanged.
HRC Futures: Here comes Trump bump 2.0?
No more excuses! The election is over. Donald Trump will be inaugurated on Monday January 20 with the Republican party in control of Congress. Now, it is time to get back to work!
HR Futures: Which way following election?
Since June, The US hot-rolled coil (HRC) futures market has been in a rare period of prolonged price stability, closely mirroring the subdued volatility seen in the physical market. Over the past five months, futures have been rangebound, with prices oscillating between a floor near $680 and a ceiling around $800. This tight range, highlighted in the chart, underscores a cautious market environment. The chart below shows the rolling 3rd month CME HRC Future.
HR futures: Support fails as market slows ahead of election
After a relatively stable and boring September, CME hot-rolled coil (HRC) futures have been on the move lower thus far in October. Since Sept. 30, the November and December futures have declined $63 and $65, respectively, with the curve’s contango steepening.
CRU: Open interest in December HR futures contract surges
CRU Principal Analyst Josh Spoores shares insight into the hot-rolled coil futures market.