LME Prepares for new Metals Contracts
The LME is currently preparing to launch the world’s first cobalt and molybdenum futures contracts that will commence trading on the exchange on Monday 22nd February.
The new contracts will introduce a presence of regulated exchange pricing, transparency and risk management for the two metals that are currently used in a wide range of applications.
Cobalt and molybdenum, both of which are largely by-products from nickel and copper mining, had a combined market value in 2009, estimated to be worth around $7 billion. Although useful as a benchmark of future pricing, there has often been an incredible volatility in cobalt and molybdenum pricing over recent years and there is a tangible need for the market to hedge price risk.
As well as benefiting from its placement on the LME, the industry is also predicted to benefit from a transparent price managed on a regulated exchange.
The move to place cobalt and molybdenum contracts onto the trading floor became apparent after the global economic downturn highlighted how exchange trading and clearing would bring more security to markets. The LME will therefore be hoping that cobalt and molybdenum producers, consumers and traders will recognise this when bidding for the new contracts.
The decision to trade both metals has been encouraged by support from a number of global brands, particularly producers, who have registered their interest in the upcoming contracts with the LME.
With no current price set, the daily official prices for molybdenum and cobalt will be originally derived from the LME’s trading floor by lunchtime on Monday.
