Fastmarkets, CME Group launch cash-settled cobalt contract

The new contract will use an average of the midpoint Fastmarkets’ standard grade, in-whs Rotterdam price assessment and will trade under the Bloomberg ticker MB071071 from December 14.

The cobalt supply chain has been joined by automotive makers and battery producers in recent years. The launch of the cash-settled contract will help those companies manage risk while the exposure to cobalt increases in line with the ramp-up of new energy vehicle production.

“As zero-emission policies continue to grow globally, clients are looking for more effective ways to manage the price risk associated with electric transportation,” Young-Jin Chang, managing director and global head of metal products at CME Group, said.

“This new product will also provide a forward curve for the cobalt market, creating more transparency around a key metal in the green economy,” she added.

Traders, brokers and banks will also have access to the financial instrument in order to hedge and invest.

“Cobalt is a prime candidate for risk management. It is central to the emerging new energy economy but susceptible to price swings as different battery chemical strategies unfold,” Raju Daswani, Fastmarkets’ chief executive officer, said.

“Given the expected dynamism, market participants require a price that is transparent, auditable and reflective of market events. Fastmarkets’ standard-grade price assessment meets all those requirements, giving a powerful tool to help market participants manage risk along the entire cobalt supply chain,” Daswani added.

Cobalt metal costs have shown volatility in recent years, hitting highs of $45 per lb in March 2018 before falling close to $12 per lb in mid-2019.

Fastmarkets’ price assessment for cobalt standard grade, in-whs Rotterdam was $15.50-16 per lb on Wednesday November 18. This is up from $13.75-14.05 per lb in July – the lowest this year after the Covid-19 pandemic disrupted end markets and weakened demand.