SHANGHAI, Oct. 29 (Xinhua Silk Road) -- The London Metal Exchange (LME) officially launched a new U.S. dollar-denominated, cash-settled futures contract on Tuesday, based on the settlement price of hot-rolled coil (HRC) futures traded on the Shanghai Futures Exchange (SHFE).
The contract marks the first time that a metals price from SHFE has been made available for trading on another exchange, representing another step forward in the international application of Shanghai prices.
The new contract, traded under the code HS, has a lot size of 10 metric tonnes and is quoted in U.S. dollars per tonne. It is cash-settled and offers 12 consecutive monthly maturities.
Its final settlement price is based on the settlement price of the SHFE HRC futures contract expiring in the following month, as recorded on the LME contract's expiry date, and converted into U.S. dollars using the USD/CNY central parity rate published by the China Foreign Exchange Trade System (CFETS).
The LME also introduced a dedicated liquidity incentive programme to support the contract's launch and encourage electronic trading.
The collaboration brings together the scale of China's steel industry, SHFE's price discovery capabilities and the LME's extensive international market network.
As the world's largest producer and consumer of steel, China plays a significant role in global steel trade. SHFE HRC futures have developed into a large and liquid market, with their prices increasingly serving as an important reference for imports of Chinese flat steel products into the Asia-Pacific region, the Middle East, North Africa and South America.
By bringing Shanghai futures prices to the London market, the new contract allows a broader range of overseas participants to use Shanghai prices for trade pricing and risk management, further extending their international reach and strengthening Shanghai's role in global steel price formation.
Currently, SHFE offers 11 designated products directly accessible to overseas participants and 47 products accessible to qualified foreign investors (QFIs), covering nearly its entire product portfolio. Its client base spans dozens of countries and regions, including producers, end-users, trading companies and financial institutions across commodity value chains. (Contributed by Ge Jiaming)
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