The London Metal Exchange (LME) and the Shanghai Futures Exchange (SHFE) announced a formal agreement to create a new LME contract that will be based on the SHFE's hot-rolled coil futures.
According to the agreement, the contract - which ties directly to SHFE hot-rolled coil futures - is slated to begin trading in October. The product builds on a collaboration first disclosed in October 2023, when the LME said it would collaborate with SHFE on product development.
The LME described itself in its statement as the world’s oldest and largest marketplace for industrial metals. The exchange has framed the new contract as part of a strategy to grow trading volumes and attract a broader set of customers to its platform.
From the perspective articulated in the announcement, China views the arrangement as a mechanism to extend its influence over international commodity prices. The Chinese government has encouraged domestic exchanges to broaden their international footprint, with the stated goal of giving Chinese market participants greater sway in global pricing dynamics for commodities.
The arrangement links a long-established global metals venue with a major domestic Chinese futures market. The LME will list a contract that references a specific SHFE product, rather than creating an independent commodity benchmark; the contract will be based on SHFE hot-rolled coil futures, as specified in the agreement.
Market participants and observers tracking the timeline can point to the October 2023 announcement as the origination of this product-development effort. That earlier statement indicated the exchanges would collaborate on designing new products, and the present agreement represents the next step in that process.
Contextual note - The information provided here is limited to the aspects explicitly described in the exchanges' announcement and the previous October 2023 statement. Where details were not specified by the exchanges, those details are not included.