The London Metal Exchange began trading a hot-rolled coil steel contract settled against the Shanghai Futures Exchange price on Tuesday. It is the first product of the two exchanges' collaboration and the first time a Shanghai metals price can be traded on another exchange.
At a glance
- 243 lots changed hands in the first four hours of trading.
- The contract settles in US dollars against the Shanghai exchange's yuan price for hot-rolled coil.
- The Shanghai contract traded 169 million lots in 2025, equal to 1.69 billion tonnes of steel.
Background
Hot-rolled coil (HRC) is a basic flat steel product used in cars, pipes, construction and machinery. The London Metal Exchange (LME) sets global benchmark prices for industrial metals, while the Shanghai Futures Exchange (SHFE) runs some of the world's most heavily traded metals contracts. A cash-settled contract pays out in money, with no physical steel delivered.
What happened
The LME's new Steel HRC Shanghai contract began trading on October 27, Reuters reported. It is the first product from the LME's collaboration with the SHFE, and the first time the Shanghai exchange has made a metals price available for trading on another exchange.
By 05:20 GMT, more than four hours into the debut, 243 lots had changed hands, according to the LME's website.
How the contract works
The contract is cash-settled against the SHFE's hot-rolled coil price, converted from yuan into US dollars by the LME's sister company Commodity Pricing and Analysis Limited.
The Shanghai contract it tracks traded 169 million lots in 2025, equal to 1.69 billion tonnes. By comparison, the LME's other China hot-rolled coil contract, based on Argus Media's export price, traded 139,109 lots last year.
What it means
The contract could help the LME raise trading volumes and draw new customers, while giving China more influence over global benchmark prices. Beijing has been pushing its exchanges to expand overseas.
Wider use will take time, said Thomas Hiemstra, head of steel derivatives at trader M7 Metals. "It's something that will need to be tracked over the next several months," he said.
Our read
Outlook: neutral. A new trading contract changes how steel prices can be hedged, not the supply or demand for steel itself.
What to watch
- Daily trading volumes in the new LME contract over the coming months.
- Whether the LME and SHFE launch more joint products.
- Uptake by steel traders and mills outside China.
For information only, not investment advice.
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Detailed analysis
Timeline
- 2026-10-27: The LME's Steel HRC Shanghai contract starts trading.
What could lift prices
- More ways to hedge could draw more trading interest to steel markets.
- Global buyers can now track Chinese steel prices directly in dollars.
What could weigh on prices
- Early trading volumes were small compared with the Shanghai market.
- Acceptance by the market may take months.
Country impact
| Country | Impact | Reason |
|---|---|---|
| China | Medium | Its exchange's steel price is now traded on a global exchange for the first time. |
| United Kingdom | Low | The London-based LME adds a new contract to win customers. |
Industry impact
| Industry | Effect | Reason |
|---|---|---|
| Steel | Neutral | Steel traders gain a new hedging tool, but its use is still small. |
Who gains, who loses
- Steel traders outside China: They can hedge against Shanghai steel prices in US dollars.
- Users of the LME's older China HRC contract: Trading may move away from the existing contract based on export prices.
Other ways this could play out
- If volumes grow, more LME-SHFE joint contracts could follow.
- If uptake stays low, the contract could remain a niche product.
Price risks
- Changes in the yuan-dollar rate affect the contract's settlement price.
- Trade tensions with China could limit Western users.
Technical view
Price is trading below both its 20-period and 50-period moving averages, a bearish alignment.
Computed from metalscost.com's own stored price history.
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