LME launches Shanghai-linked steel contract, over 550 lots traded
The London Metal Exchange began trading its new hot-rolled coil steel contract on Tuesday, the first product born from its tie-up with the Shanghai Futures Exchange. More than 550 lots changed hands in the opening session across the two active contract months.
The new instrument, known as the LME Steel HRC Shanghai contract, settles in cash against the Shanghai Futures Exchange’s (SHFE) hot-rolled coil price, which is converted from yuan into US dollars by sister firm Commodity Pricing and Analysis Limited. It marks the first time the SHFE has let one of its prices be traded on a foreign exchange.
An LME spokesperson said quoting was active and the start had gone well, pointing to the volume traded in the first two live months. Two further contracts due for February and September 2027 were kept offline while the exchange looked into a possible technical glitch; the spokesperson noted these months are not active on the SHFE, so no activity had been expected there anyway.
Thomas Hiemstra, head of steel derivatives at trading firm M7 Metals, said how far the contract gets adopted will take time to become clear, adding that uptake needs watching over coming months rather than judged on day one. Tiger Shi, chief executive of brokerage Bands Financial in Hong Kong, called the debut a relative success, saying exporters of hot-rolled coil now have a venue to hedge dollar-denominated physical deals, with activity likely to build gradually.
The SHFE’s underlying steel contract is tied to China’s vast domestic market and saw 169 million lots traded in 2025, equal to 1.69 billion metric tons. For the LME, the launch is part of a push to lift trading volumes and draw new participants by linking to one of the world’s most liquid futures markets, while for China it fits a broader strategy of expanding its exchanges abroad to gain more influence over global commodity benchmarks.
Why it matters for markets: A deeper link between Chinese and international steel pricing could affect how global metals traders hedge exposure to Chinese steel demand, with potential knock-on effects for industrial metals pricing and sentiment tied to China’s manufacturing and construction activity.
Source: Economic Times Markets