09 AUGUST 2012Reuters
CME considering aluminum contract to rival LME: sources
Edited by : AL CIRCLE
2 min read
CME Group Inc has canvassed traders in recent weeks about the viability of an aluminum contract to rival that of the London Metal Exchange, which has dominated the $80 billion market for decades, industry sources said.
The talks are at an early stage, according to two traders who said the CME had approached their companies. They said the Chicago-based exchange is seeking to capitalize on frustration with the 135-year-old LME's handling of its warehousing policy and to break London's grip on the 40-million-tonne market.
After losing in the final stages of the year-long takeover battle for the LME in May, the CME has little choice but to challenge its rival head-on if it wants to expand its share of the lucrative global metals market, dealers say.
In addition to motive, the CME also has opportunity: aluminum users that make the sheet metal for drinks cans and cars are still seething over massive queues and record premiums tied to the LME's global warehousing system.
"We had the CME coming through our office saying 'We hear people are angry.' They want to do another contract. They kept bringing up the warehouses," said one of the traders, who spoke on condition of anonymity because he is not authorized to speak to the press.
That sentiment could help a new contract succeed where others failed. The New York Mercantile Exchange (NYMEX), now owned by CME, struggled for 10 years to gain traction with a North American aluminum contract before being delisted in 2009. It was unable to lure established users away from London.
A CME spokesman declined to comment on any such plans. He said the Chicago exchange was focusing on its aluminum swap contract, which launched in April but has yet to trade.
The LME declined to comment.
The talks are at an early stage, according to two traders who said the CME had approached their companies. They said the Chicago-based exchange is seeking to capitalize on frustration with the 135-year-old LME's handling of its warehousing policy and to break London's grip on the 40-million-tonne market.
After losing in the final stages of the year-long takeover battle for the LME in May, the CME has little choice but to challenge its rival head-on if it wants to expand its share of the lucrative global metals market, dealers say.
In addition to motive, the CME also has opportunity: aluminum users that make the sheet metal for drinks cans and cars are still seething over massive queues and record premiums tied to the LME's global warehousing system.
"We had the CME coming through our office saying 'We hear people are angry.' They want to do another contract. They kept bringing up the warehouses," said one of the traders, who spoke on condition of anonymity because he is not authorized to speak to the press.
That sentiment could help a new contract succeed where others failed. The New York Mercantile Exchange (NYMEX), now owned by CME, struggled for 10 years to gain traction with a North American aluminum contract before being delisted in 2009. It was unable to lure established users away from London.
A CME spokesman declined to comment on any such plans. He said the Chicago exchange was focusing on its aluminum swap contract, which launched in April but has yet to trade.
The LME declined to comment.
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