LME launches hot-rolled coil contract tied to Shanghai exchange

what happened

The London Metal Exchange has started trading a new hot-rolled coil steel future, its first product stemming from a tie-up with the Shanghai Futures Exchange. It marks the first time the SHFE has offered a metals price for trading on a rival venue. According to Reuters, 243 lots had changed hands by 0520 GMT, more than four hours after launch.

The contract is cash-settled against the SHFE's HRC price, which Commodity Pricing and Analysis Limited, a sister company of the LME, converts from yuan into dollars. The LME hopes the instrument will lift volumes and draw in fresh clients, since it references one of the most actively traded futures globally. The Shanghai benchmark reflects China's large domestic steel market, where 169 million lots, equal to 1.69 billion metric tons, traded in 2025.

The LME's other China-linked HRC contract, based on Argus Media's assessments of steel exported from Chinese ports, recorded 139,109 lots in the same year. Thomas Hiemstra, head of steel derivatives at steel trader M7 Metals, said uptake will hinge on how widely the market embraces it: "I don't think it's going to happen overnight." He added that it will need tracking over the coming months.

why it matters

The launch fits into Beijing's broader effort to gain more sway over global price benchmarks. If liquidity builds, some hedging and trading of HRC could gradually migrate to the new contract, giving the LME a firmer footing in Asian steel. Volumes are still modest, so the real effect remains unclear.

market impact

Steel: a new benchmark based on Chinese HRC could shift part of trading volume toward the LME

tags

instruments