“[A] number of cobalt producers have indicated a desire to list their brand on the LME,” the exchange said in the note, “but have expressed concerns that, in the event that the ‘user choice’ model results in a migration of liquidity to the cash-settled LME cobalt future, the payment of brand listing fees for the [physically-settled contract] would represent a poor investment on their part.”
Earlier this month, the LME launched three new cash-settled contracts settled against Fastmarkets’ benchmark prices, providing effective risk management tools for the aluminium, alumina and cobalt markets.
The fee suspension reaffirms the LME’s commitment to its existing physically-settled contract, the exchange said, specifying that the LME observes substantial market support for the existing contract.
Transaction fees for physically-settled derivatives on the LME are $0.50 for basis (ring) trading, trade at settlement and give-up trades, while non-ring trades are currently set at $0.90 per leg per side per lot.
“Accordingly, the LME will waive brand listing fees for prospective producers, effective for all producers submitting an application within six months of the date of this notice,” the LME said.
There are eight cobalt brands approved for delivery on the LME physically-settled contract: Vale Canada, Sumitomo Metal Mining, Jinchuan Group, Freeport Cobalt, CTT, Yantai Cash Industrial, Chambishi Metals and GEM (Jiangsu) Cobalt Industry.
LME official cobalt prices are currently bid at $29,000 per tonne for cash, three-month and 15-month contracts, with offers at $30,000 per tonne for each.
Meanwhile, Fastmarkets’ cobalt contract on the LME closed at $31,027.40 per tonne on March 25.
The standard-grade cobalt price – the benchmark for physical settlement across the cobalt supply chain – was last assessed by Fastmarkets on March 22 at $13.30-14.20 per lb, in-warehouse.
Click here for the cobalt contract specifications.
Fastmarkets will host a webinar alongside the LME on April 8 to introduce the new cash-settled cobalt contract. Register here to take part in the webinar.
The London Metal Exchange has announced a six-month suspension of listing fees for new cobalt brands on the exchange in a note to members on Tuesday March 26, amid emerging liquidity concerns from producers.