June 6, 2018 / 3:51 PM / 2 months ago

LME says plans to launch about 15 contracts from January 2019

(This June 6 story corrects headline, 1st and 2nd paragraphs to make clear not all 15 new contracts would be launched in January and 7th paragraph to delete reference to steel premium contracts.)

The offices where the London Metal Exchange is headquartered are seen in the City of London, Britain, January 18, 2018 REUTERS/Peter Nicholls

By Eric Onstad

LONDON (Reuters) - 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 U.S. 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 Ltd. (0388.HK).

“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.”

Reporting by Eric Onstad; editing by David Evans/Adrian Croft

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