Group Inc. will launch a physically delivered aluminum
contract, managing director of metals products Harriet Hunnable
"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
"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