Hong Kong Exchanges & Clearing (388) Ltd., owner of the London Metal Exchange, will introduce futures contracts on thermal coal and industrial metals to attract Asian users this year.
The new products are the first step to enable commodity users and producers in mainland China to gain access to the international markets restricted to them and vice versa, Chief Executive Officer Charles Li said today at a briefing in Hong Kong. HKEx on April 10 announced a planned link connecting Shanghai and Hong Kong’s equity markets.
Hong Kong Exchanges wants to expand its commodities trading after spending $2.2 billion buying the London Metal Exchange, the world’s largest metals bourse, in December 2012. It is competing with IntercontinentalExchange Group Inc. and CME Group Inc. in commodities where derivatives trading is growing at faster than stocks and bonds.
“Today we’re starting in commodities what we did 20 years ago in equities,” Li said at the briefing. It will probably less than five years for HKEx to provide “mutual access” between China to the international world in terms of commodities, he said.
China is the largest producer and importer of thermal coal, the variety used in power stations. The Asian nation is also the largest consumer and producer of zinc and aluminum, and top copper importer.
Both fuel and metals futures will be monthly contracts and financially settled, according to an HKEx statement. API 8 thermal coal futures, in 200 metric tons per contract, will be dollar-denominated while those of aluminum, copper and zinc, will trade in Chinese yuan in five tons per lot, HKEx said. They are subject to regulatory approval, it said.
HKEx’s new metals products are known as LME mini because they are smaller than similar metals contracts listed on the exchange in London. The LME in 2011 partnered with Singapore Exchange Ltd. on some LME mini contracts traded in U.S. dollars that were made dormant this year after attracting little interest from customers.
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