The London Metal Exchange launched a hot-rolled coil futures contract on Oct 27 based on the settlement price of the corresponding futures traded on the Shanghai Futures Exchange, giving international investors access to the Shanghai price benchmark.

It is the first time the SHFE has licensed a metal futures settlement price for use in a contract traded on an overseas exchange, representing another step forward in the internationalization of China's commodity futures market.

The LME contract is denominated in US dollars and cash-settled, with each lot representing 10 metric tons.

Lu Dongsheng, CEO of the SHFE, said the exchange's hot-rolled coil futures price has become an important reference for buyers of Chinese flat steel in the Asia-Pacific region, the Middle East, North Africa, and South America.

According to the SHFE, its hot-rolled coil futures are the world's most actively traded flat-steel futures by volume. Average daily trading volume reached about 700,000 lots in 2025, while average daily open interest reached a record 1.9 million lots.

The SHFE contract has 20 designated delivery warehouses and 22 eligible delivery brands. The brands' combined output accounts for more than 60 percent of China's hot-rolled coil production.

The new LME contract gives overseas traders an exchange-traded tool to hedge against price swings when purchasing steel from China.

Tiger Shi, CEO of Bands Financial, said Chinese traders had long used domestic futures to manage price risk associated with physical steel trading, while overseas traders had largely relied on physical trading.

The SHFE has previously authorized Norway's NOREXECO in Norway to list pulp futures and Japan's Osaka Exchange to launch natural rubber futures based on SHFE prices.

Source: Yicai