LME Launches Cobalt and Molybdenum Contracts

The London Metal Exchange (LME) has announced that it will launch cobalt and molybdenum futures contracts to be traded on the exchange starting Monday, Feb. 22, 2010.

Cobalt and molybdenum, which are largely byproducts from nickel and copper mining, had a combined market value estimated at around $7 billion in 2009, according to an LME news release. In comparison, the tin market’s value in 2009 was about $5 billion, says the LME.

“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,” says Chris Evans, head of business development for the LME. “Industry will also benefit from a transparent price discovered on a regulated exchange.”

Adds Martin Abbott, LME’s chief executive, “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.

According to the LME news release, support for LME trading of both metals “has been demonstrated by producers with cobalt and molybdenum brands registered for good delivery.” Cobalt producers Vale Inco, Votorantim, Sumitomo and a number of Chinese producers and molybdenum producers such as Chile’s Molymet and Mexico’s Molymex have already registered with the LME. 

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The LME offers metals price risk management tools including futures and options contracts for aluminum, copper, tin, nickel, zinc, lead, aluminum alloy, steel billet and plastics. More information on the LME can be found at www.lme.com.