LME Europe Steel Contract to Face Delay Until 2020

SEATTLE (Scrap Monster): Owing to demand by the European industry to price the contract in Euros, the newly planned European steel contract by the London Metal Exchange (LME) is likely to be delayed until next year. This is because the exchange’s clearing house currently has no provision to process euro-based contracts.

LME, in a response to requests for comments, stated that the exchange is principally designed with the dollar as the primary currency for trading and clearing across all contracts. It noted that LME Clear could presently clear only dollar-based contracts. Fixing LME Clear to deal with euro-based contract settlement requires large amount of investment and time. It could extend until next year, steel traders noted. Furthermore, lack of resources at LME could even lead to abandonment of the European steel contract, they added. Meantime, LME has declined to provide a definite timeline for making the necessary changes.

As such, LME’s European steel contract has no notable competitors. However, the only fact that Europe prices steel in euros has delayed its launch. Incidentally, the industry has been eagerly waiting for the launch of the contract ever since LME announced it. It must be noted that the exchange already has contracts for steel rebar, a type of construction steel and steel scrap, which were launched in 2015.

The LME had recently announced launch of seven new cash-settled contracts including hot-rolled coil (HRC) steel, alumina and cobalt, in order to boost exchange’s profits.