27 October 2026 — The London Metal Exchange (LME) has officially launched a US dollar-denominated, cash-settled futures contract based on the settlement price of the Shanghai Futures Exchange (SHFE) hot-rolled coil (HRC) futures. This marks the first time that a Chinese metal futures price has been used, through a settlement price licensing arrangement, as the benchmark for a futures contract listed on an established overseas futures exchange.

The new contract, with the code HS, has a lot size of 10 metric tonnes, is quoted in US dollars per metric tonne and is cash-settled. It offers 12 consecutive monthly contract maturities. The final settlement price is determined by reference to the settlement price of SHFE HRC futures contract expiring in the following month, as recorded on the LME contract's expiry date, converted into US dollars at the USD/CNY Central Parity Rate published by the China Foreign Exchange Trade System (CFETS). The contract design takes into account the liquidity characteristics of SHFE HRC futures and international steel trading practices, providing steel producers, traders, processors and end-users worldwide with an additional tool for price risk management.

To support the smooth launch of the contract and the development of market liquidity, the LME has introduced a dedicated liquidity incentive programme to encourage electronic trading. According to data provided by the LME, as of 18:00 London time, 880 lots had traded on LMEselect. Including trades executed in the inter-office market through RIBs/IDBs, total cleared volume for the day stood at 2,513 lots. CITIC, Nanhua, BANDS and FIS were among the institutions actively participating in the market.

The licensing arrangement makes Shanghai steel prices directly available to overseas markets, facilitating risk management in international steel trade. It also represents the recognition of a Chinese futures product by an established overseas market and further reinforces the role of Shanghai steel futures as an international pricing benchmark. This is an important achievement in deepening practical international cooperation in China’s futures market, advancing high-standard opening-up and supporting the development of Shanghai as an international financial centre.

The collaboration combines the scale of China's steel industry, SHFE's price discovery capabilities and the LME's extensive international market network. China is the world's largest producer and consumer of steel. SHFE HRC futures have developed into a large and liquid market, with prices increasingly serving as an important pricing reference for imports of Chinese flat steel products into the Asia-Pacific, the Middle East, North Africa and South America. Leveraging the LME's established international membership network and trading and clearing infrastructure, the new contract enables a broader range of overseas market participants to access Shanghai prices for international steel trade pricing and risk management.