CME Is ‘on track’ with aluminum futures contract as premium trade takes a rise

CME Group Inc., the largest futures exchange in the world, is ready to start up an aluminum futures contract and is even planning to introduce other metals products.

CME said it has planned last year to start something alternative to aluminum contract traded on the LME for improving transparency. Consumers such as MillerCoors LLC complained they have wait for long in order to withdraw metals from the warehouses that are monitored by the LME distorted prices. Producers including United Co. Rusal said it is important that exchange improves transparency.

“We are still on track and are very pleased with the amount of engagement from the industry,” Harriet Hunnable, managing director of metals at Chicago-based CME, said today in an interview in London, declining to provide a start date for the new contract. “I am confident we will have liquidity. I expect a good non-U.S. participation in this contract.”

CME also added aluminum premium had swapped futures in the year 2012 that are now cash-settled. The new aluminum futures contract will trade electronically and on the Comex floor in New York, according to Hunnable. The metals industry asked for a contract listed on a U.S. exchange, she said.

“We are definitely looking at further opportunities,” Hunnable said. “There is a lot of focus on warehouses, but there has to be focus on transparency, more centralized liquidity, more dynamic products.”

CME may also look at introducing contracts including a product based on European aluminum premiums. Trading of its Midwest U.S. premium contract surged last month as the surcharge soared to a record, Hunnable said. Investors bought and sold 231 contracts in January, compared with a single one in the prior month, CME data show.

“We have seen the industrial users actively using the premium contract,” Hunnable said. “There is a big community that only now is starting to understand the contract.”