Futures

LME Plans HRC Futures Contracts

March 26, 2018

The London Metal Exchange is planning to launch three regional futures contracts for hot rolled coil. The HRC contracts would be for North America, Northern Europe and FOB China. Timing and other details of the launch are not yet available, said an LME spokesperson.

Metal Bulletin reported in a March 15 interview with LME CEO Matthew Chamberlain that the exchange is implementing a system upgrade that would allow it to launch up to six new contracts by the end of this year. Chamberlain told Metal Bulletin he is very confident about regional contracts in HRC. “A lot of people trading our scrap and rebar contracts have told us they’d do HRC,” he said.

Will LME hot rolled contracts be successful? It all depends on the details of the contracts and their trading volumes, one source told Steel Market Update. “The recent additions in the LME scrap and rebar contracts have boosted liquidity in the CME busheling contract and the CME HRC contract. If the Northern Europe and Chinese futures gain volume, I would expect it would boost Midwest futures volume. I would be concerned about having competing Midwest HRC contracts that could splinter liquidity, but these new contracts could boost liquidity, as well. Hard to tell. There is definitely a need for a higher frequency index for Midwest HRC futures.”