LME to launch steel futures linked to Shanghai

Traders Union
All News
Financial News
LME to launch steel futures

Highlights

The LME plans to launch a hot-rolled coil futures contract in October.
The contract will settle against SHFE’s monthly U.S. dollar HRC price.
China is the largest producer and consumer of hot-rolled coil.

London contract, Shanghai benchmark

The LME said it will introduce a hot-rolled coil futures contract in October that will settle against the Shanghai Futures Exchange’s monthly U.S. dollar HRC price. According to Bloomberg, the cash-settled product is designed to give companies and investors outside China easier access to one of the world’s most active steel contracts while using the LME’s established trading infrastructure.

Hot-rolled coil is a flat steel product used in construction, automobiles, machinery, pipelines, and shipbuilding. The Shanghai Futures Exchange describes HRC as a product made from steel billets that are heated and rolled into wide strips, valued for strength, toughness and weldability.

The contract also deepens cooperation between the LME and SHFE at a time when China is trying to make its commodities markets more accessible to foreign participants. In April, SHFE allowed qualified overseas investors to trade nickel futures, expanding an internationalization push that supports Beijing’s broader goal of giving Chinese prices a larger role in global commodity benchmarks.

China pushes pricing influence outward

China is the world’s largest producer and consumer of hot-rolled coil, making Shanghai prices a key reference point for steelmakers, traders, manufacturers and construction firms. Historically, many global commodities benchmarks have been formed in London, New York and Singapore. China’s strategy is to bring more international participation into domestic markets while encouraging global firms to use Chinese reference prices.

The LME contract gives that strategy a practical channel. Overseas users will not need to trade directly in mainland China to gain exposure to Shanghai HRC pricing. Instead, they can use a cash-settled LME product linked to the SHFE price.

A new link in steel hedging

For industrial companies, the contract could simplify hedging against China-driven steel price moves. HRC prices are important across supply chains tied to autos, machinery, infrastructure and energy equipment, so easier access to Shanghai pricing may help global firms manage costs.

For exchanges, the deal is also strategic. The LME strengthens its role in ferrous markets, while SHFE gains a broader international audience for a China-based benchmark. The new contract may not displace existing steel references quickly, but it gives global investors a clearer path to trade the price signal from the world’s dominant steel market.

It was earlier reported that London Metal Exchange tightens EU warehousing rules for Russian copper and cobalt.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.