The London Metal Exchange will launch the world's first cobalt and molybdenum futures contracts to be traded on exchange on February 22nd 2010. The new contracts will introduce regulated exchange pricing, transparency, risk management and clearing to these two important metals used in a wide range of applications.
Historically cobalt and molybdenum have traded without the benefit of regulated exchange security and transparency. In particular, trading on the LME a Regulated Investment Exchange will introduce important additional strengths to these markets. These include:
Transparent price discovery and neutral reference pricing
Flexibility of trading on Select, the inter office telephone market and the Ring the Exchange’s open outcry trading floor
Leveraged trading and risk management
Counterparty credit security and guarantees via clearing on LCH.Clearnet
Support for LME trading of both metals has been demonstrated by producers with cobalt and molybdenum brands registered for good delivery. Cobalt producers with good delivery brands include Vale Inco, Votorantim, Sumitomo and a number of Chinese producers. Molybdenum producers include Chile’s Molymet and Mexico’s Molymex. In total, 12 cobalt and molybdenum brands are already registered with the LME with further applications made to the Exchange.
Consumers are also expected to use the LME’s minor metals prices as contract reference prices. Brazil’s Votorantim and China's Jiangsu cobalt contracts with LN Metals are both being referenced against the LME contract. Others are expected to follow.
Mr Chris Evans head of business development at the LME said that "There has been incredible volatility in cobalt and molybdenum prices in recent years and there is a tangible need for a terminal market to hedge price risk. Industry will also benefit from a transparent price discovered on a regulated exchange."
Mr Martin Abbott CEO of LME said that "The global economic downturn has highlighted how exchange trading and clearing bring more transparency and security to markets. We are confident that cobalt and molybdenum producers, consumers and traders will recognize these important qualities in our new contracts."
The daily official prices for molybdenum and cobalt will be derived from the 12:20 ring in the LME's open outcry trading floor in London. |
