- Six new cash-settled futures include lithium hydroxide, two regional steel scrap contracts, European HRC, aluminium scrap, and a duty paid European aluminium premium contract
- Lithium and scrap contracts deliver key part of LME sustainability agenda – providing pricing and access for products and services that support the circular economy and EV transition
- New cash-settled futures trade monthly out to 15 months and priced in USD
The London Metal Exchange (LME) is today pleased to announce the launch of six new cash-settled futures – including lithium hydroxide, steel scrap and aluminium scrap contracts – offering pricing and risk management solutions for metals that support the electric vehicle (EV) transition and circular economy.
Georgina Hallett, LME Chief Sustainability Officer, commented: “We are really pleased to be delivering an important element of our sustainability strategy – which positions transparency and access as the core components for making metals the cornerstone of a sustainable future. Our lithium and scrap contracts are the product of valuable engagement with the metals and mining industry, our members and core users, as we all seek to best support the growth of the circular and low carbon economies.”
LME Lithium Hydroxide CIF (Fastmarkets MB) is a battery-grade futures contract designed to bridge the need for risk management for battery and car manufacturers, and the growing interest from investors seeking exposure to the rapidly growing sector. Transferring risk via derivatives such as these will help physical market participants manage their supply chain, facilitating planning, financing and long-term growth.
Ron Mitchell, Sales Director of Tianqi Lithium Corporation’s International Business Group and Chairman of the LME Lithium Committee, commented: “The LME has been working collaboratively with lithium market participants, across the globe, for over three years to gain an in-depth understanding into the commercial and technical nuances of an industry that is still in the preliminary stages of its maturation. The launch of the lithium hydroxide cash-settled futures contract represents a significant milestone not only for the LME but also for the global lithium industry. The contract offers the industry an important price risk management tool and comes at a critical time to support the future electrification goals of many nations.”
Together with its existing steel scrap contract (Platts TSI HMS 1/2 80:20 CFR Turkey), the two new regional contracts – LME Steel Scrap CFR Taiwan (Argus) and LME Steel Scrap CFR India (Platts) – provide a set of tools to manage price risk for global flows of steel scrap products, positioning the LME at the centre of the global steel scrap trade. These two contracts reference key regional prices underpinning the two main routes for container-shipped steel scrap, which can have very different dynamics from bulk shipping markets like CFR Turkey.
Also launching today is a new European hot-rolled coil contract – LME Steel HRC NW Europe (Argus) – in response to strong support from the flat steel market. Key players of important European industrial sectors, including automotive, renewables and construction, have expressed their desire for a product that removes the basis risk introduced by the increased regionalisation of steel markets.
LME Aluminium UBC Scrap US (Argus) is the Exchange’s first scrap aluminium contract and focuses on the sizeable North American used beverage can (UBC) market, supporting this industry in managing its price risk and facilitating the development of the broader recycled aluminium value chain. The second aluminium product in this launch is LME Aluminium Duty Paid European (Fastmarkets MB). This contract completes the LME offering for European aluminium premiums, enabling hedging both on the duty paid and the duty unpaid price, which have different user bases and pricing dynamics.
All the new cash-settled futures trade monthly out to 15 months, and are priced and cleared in USD.
Background
• The full list of new cash-settled futures is as follows:
