LME announces successful launch of ferrous and premium contracts

November 23, 2015

This post provides an update on scrap metal prices for ships and an update on the LME

LME announces successful launch of ferrous and premium contracts
• New suite of ferrous contracts gives steel industry tools to hedge scrap and rebar prices
• LME Aluminium Premiums aim to help physical industry observe and hedge the premium portion of the ‘all-in’ aluminium price
• Contract launches delivered by smoothly executed upgrade of LME systems

The London Metal Exchange (LME) today announces the successful launch of LME Aluminium Premiums, LME Steel Rebar and LME Steel Scrap, the first new contracts to be offered by the Exchange in more than five years.

“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-focussed product launch, and we have collaborated with participants throughout the metals value chain to ensure we have created contracts that people want to trade.”

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.



The new ferrous contracts will be supported by market-making programmes to optimise market depth and tightness of spreads.

With the physically settled Aluminium Premiums, participants can now hedge the regional ‘all-in’ price to ensure metal they receive is readily 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.
The premium contacts were requested by market participants as part of the LME’s warehouse reform programme, and represent one of the 12 items in the package of measures announced in November 2013.

“We are delighted to be launching these new contracts today,” says Matthew Chamberlain, Head of Business Development. “We have worked extensively with the market on these products, which will allow users to fully risk-manage their exposure to regional market dynamics.”

The launch of the new contracts was timed to coincide with a major upgrade of the LME’s electronic systems, including LMEselect and real-time clearing system LMEmercury, which completed successfully on 23 November.

Ship and Vessel Scrap Metal Prices

GMS Weekly states ” Historical lows in the dry bulk sector point towards a worrying increase in the number of
candidates expected to hit the market before the end of the year. Container rates too continue to disappoint and the anticipated deluge of incoming vessels may send the markets spiraling even further down, as supply outstrips demand.”

For week 47 of 2015, GMS demo rankings for the week are as below:

 

Demo Ranking Country Market Sentiment GEN CARGO

Prices

TANKER

Prices

1 Bangladesh Weak USD 300/lt ldt USD 330/lt ldt
2 Pakistan Weak USD 300/lt ldt USD 330/lt ldt
3 India Weak USD 280/lt ldt USD 310/lt ldt
4 Turkey Weak USD 170/lt ldt USD 175/lt ldt
5 China Weak USD 125/lt ldt USD 145/lt ldt