LONDON CME Group Inc. will launch a physically delivered aluminum contract, managing director of metals products Harriet Hunnable said.
"We are well progressed in talking with all parts of the industry. We want to launch a futures contract that is an alternative to other exchanges contracts," she said.
CME clients want a physical contract with the price transparency, clearing and deep and liquid markets that CME can offer, Hunnable said. "They want to be able to trade and clear with confidence."
The decision comes four years to the month after CME dropped its aluminum contract, which never developed as a viable alternative to the London Metal Exchanges aluminum contract.
But CMEs latest move comes as the LMEs aluminum contract faces challenges from producers and consumers.
CME cant yet confirm a launch date, but has confirmed that it will start with a U.S. client base and regional warehouse structure.
The new contract will complement CMEs existing U.S. Midwest aluminum transaction premium swap futures contract.
Asked how this might interact with the new aluminum futures contract, Hunnable said that the market will find its price depending on such factors as the physical location and the exact contract specification.
"It will reflect the true market price for aluminum," she said, adding that CME has done a lot of work on the physical delivery aspects and on "what will be robust for the future."
Hunnable declined to discuss details of the new warehouse arrangements, but confirmed that CME has the right to determine the ownership of the warehouses it approves for physical delivery of metals against CME contracts.
A version of this article was first published in AMM sister publication Metal Bulletin