The London Metals Exchange (LME), the world's biggest non-ferrous metals market, says the Shanghai Futures Exchange should welcome the launch next month of steel futures targeting producers and traders in China.
Chief executive Martin Abbott said the LME's new Far East steel futures contract, which will provide a hedging tool against price risk, would be 'complementary' to Shanghai's plans to introduce its own steel futures contract later this year.
'For them there is an advantage of launching China focused futures that can be traded against the backdrop of a global contract,' Mr Abbott said in Beijing during a trip to drum up business for the new futures.
Although some industry officials see the LME contract as a rival to Shanghai's planned steel futures, others hope it will boost enthusiasm from traders seeking to profit from price differences between the London and Shanghai exchanges.
'We expect traders in the future to trade daily on both exchanges to take advantage of the opportunity to arbitrage,' Mr Abbott said.
The Shanghai Futures Exchange declined to comment yesterday.
The LME says steel futures are needed to increase price transparency, control exposure to risk and help traders manage cash flows in the face of growing price volatility in the global steel market. Locking in future prices will also allow producers to turn steel inventories into cash or security for financing capital projects.