New Fastmarkets-settled cobalt contract to launch at CME Group

Fastmarkets, the industry-leading cross-commodity PRA, announced on Thursday November 19 that CME Group has chosen Fastmarkets as the PRA for its new cash-settled cobalt futures contract, which will launch on December 14, pending regulatory review. The new contract will be listed on and subject to the rules of COMEX and settled against the benchmark daily standard-grade cobalt price assessed by Fastmarkets.

Cobalt is a critical building block of the emerging new energy economy and a principal material for the fast-growing electric vehicle market. Cobalt prices have recovered from three-year lows seen in 2019 but are significantly below the 10-year highs seen in 2018. There is continuing uncertainty in the cobalt market: Companies are researching various competing battery technologies while some market participants are stockpiling or signing multi-year cobalt contracts to secure supply. The growing size of the cobalt market, alongside volatility in prices, underscores the need for and value of a hedging mechanism. 

CME Group will offer this hedging mechanism settled against the following Fastmarkets price:

Cobalt standard grade, in-whs Rotterdam, $/lb

  • Fastmarkets price code: MB-CO-0005
  • Bloomberg Ticker: MB071071

The final settlement price will be an arithmetic average of the daily Fastmarkets standard-grade cobalt (midpoint) price. 

The launch of the contract builds on growing participation in OTC trades, which are cash-settled against Fastmarkets’ cobalt price assessments. Key market participants have endorsed the exchange’s partnership with Fastmarkets as a critical step in the evolution of risk management solutions for the cobalt market.

“As zero-emission policies continue to grow globally, clients are looking for more effective ways to manage the price risk associated with electric transportation,” said Young-Jin Chang, Managing Director and Global Head of Metal Products at CME Group. “This new product will also provide a forward curve for the cobalt market, creating more transparency around a key metal in the green economy.”

Fastmarkets has been the standard-bearer for cobalt prices – giving market participants the confidence to make critical financial decisions based on price. Fastmarkets has invested significantly in resources and technology to ensure its price-assessment process aligns with IOSCO principles. The Fastmarkets daily standard-grade cobalt price was validated over a 12-month period in September 2019. It then received a 12-month re-validation in September 2020.
 
“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,” said Fastmarkets CEO Raju Daswani. “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.” 
 
To view Fastmarkets Metals & Mining price methodology/specifications, please click here.

For more information on CME Group’s new Cobalt futures, please click here.

For further inquiries, please contact Katharine Kellar at katharine.kellar@fastmarkets.com.

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