Key Moments
- The London Metal Exchange will introduce a new contract in October based on Shanghai Futures Exchange hot-rolled coil prices.
- SHFE’s hot-rolled coil futures recorded 169 million lots of volume in 2025, far exceeding the 139,109 lots for LME Chinese HRC futures.
- Currency conversion and pricing for the new product will be managed by a Dubai-based company set up by LME and Hong Kong Exchanges and Clearing Ltd.
Strategic Partnership Between LME and SHFE
The London Metal Exchange (LME) has reached a landmark agreement with the Shanghai Futures Exchange (SHFE) to use Chinese steel futures prices as the basis for a new LME contract. The move advances China’s effort to strengthen its role in setting global commodity prices.
Under the arrangement, the LME intends to leverage one of the most actively traded steel contracts listed in Shanghai, seeking to increase its own trading volumes and broaden its customer base by aligning with a highly liquid benchmark from the SHFE.
October Launch for Shanghai-Linked Hot-Rolled Coil Contract
In a joint statement, the LME – described as the world’s oldest and largest market for industrial metals – and the SHFE said trading in the new contract, which will reference Shanghai hot-rolled coil (HRC) futures, is scheduled to begin in October.
A steel trader told Reuters, “It makes sense from the price discovery aspect, but it will need liquidity. The LME has to protect its place as the price discovery centre and the go-to market for metals.”
China’s Push to Shape Global Commodity Pricing
The initiative aligns with a broader directive from the Chinese government encouraging domestic exchanges to introduce new products and extend their reach internationally. The overarching goal is to strengthen the position of Chinese market participants in determining global commodity prices.
Commenting on the collaboration, SHFE Chairman Tian Xiangyang said, “This cooperation will further attract global steel enterprises and financial institutions to participate in price formation, and continuously enhance the international influence of China’s steel futures products.”
Volume Disparity Highlights Shanghai’s Market Depth
Trading data underscores the scale of the SHFE’s existing steel contract relative to the LME’s product. The SHFE hot-rolled coil futures contract registered 169 million lots of volume in 2025, equivalent to 1.69 billion metric tons. By comparison, the LME’s Chinese HRC futures recorded 139,109 lots over the same period.
| Contract | Exchange | Volume (lots) | Equivalent Volume (metric tons) |
|---|---|---|---|
| HRC futures | SHFE | 169,000,000 | 1,690,000,000 |
| Chinese HRC futures | LME | 139,109 | Not stated |
From 2023 Cooperation Agreement to New Product
The newly announced LME/SHFE contract traces back to an October 2023 statement in which the LME said it had agreed to collaborate with the SHFE on product development.
LME Chairman John Williamson said, “It will give companies outside China easier access to one of the world’s most liquid commodity contracts alongside the simplicity of trading a cash-settled LME contract.”
Dubai Entity to Handle Currency and Pricing Functions
Operational aspects such as currency conversions and other pricing-related work for the new contract will be carried out by a company in Dubai that was created in October by the LME and its parent firm, Hong Kong Exchanges and Clearing Ltd.
At the time of its establishment, the LME said the Dubai-based vehicle – Commodity Pricing and Analysis Limited – was associated with its plans to introduce a new system for pricing premiums on lower-carbon metals.
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