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Metal Recycling News November 26, 2015 11:30:42 AM

LME launches new cash-settled Steel Scrap Contract

Carolina Curiel
ScrapMonster Author
Teh London Metal Exchange has launched three new contracts this week- LME Steel Scrap, LME Steel Rebar and LME Aluminium Premiums contract.

LME launches new cash-settled Steel Scrap Contract

CANTERBURY (Scrap Monster): The London Metal Exchange (LME) has launched new Steel Scrap Contract. This is one among the three new contracts introduced by the exchange in more than five years. The other two contracts launched this week are LME Steel Rebar contract and LME Aluminium Premiums contract.

According to LME press release, the LME Steel Scrap and LME Steel Rebar contracts will be cash settled against physical Turkish scrap and rebar prices respectively. The contracts will be traded on LMESelect electronic platform in small lots of 10 metric tons. The comparatively smaller lot size is expected to make the contracts more accessible to smaller market players. In addition, the exchange will also offer discounts for large volume trades. LME also plans to support several programmes that are aimed at optimizing market depth and tightness of spreads.

The steel rebar and scrap contracts are designed to ensure better participation by leading market players, unlike the physical delivery settled steel billet contracts which proved to be a failure. The exchange has put considerable effort to ensure quicker and comprehensive uptake of the contract. Trading firm Stemcor has ensured active participation in the newly launched contracts.

LME has finally managed to deliver a physical delivery premiums contract for aluminium. The industry had been pressing for release of such a contract ever since premiums on the metal jumped to record highs during 2014. The premiums which hit almost $500 per ton during 2014 have collapsed to nearly $100 per ton during the current year. However, the premiums have started to rise during the recent weeks. Tight supply situation resulting from shutdown of facilities by aluminum majors including Alcoa and Century is expected to drive the premiums higher in 2016.

The LME Aluminium Premiums contract has four regional variations, the US, Europe, East Asia and South East Asia and will be physically-settled as opposed to the cash-settled CME contracts.

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