• Total volume up 21.9 per cent with a total of 146.6 million lots traded in 2011
• Total value traded increases 32.8 per cent to $15.4 trillion
• LME Cobalt volumes hit new highs
• Record market open interest of 2.9 million lots
The London Metal Exchange (LME) announced new records for volume and value of trading in 2011, strengthening its position as the world’s premier metals exchange.
Total trading in 2011 rose 21.9 per cent on 2010 reaching 146.6 million lots (120.3 million in 2010), the equivalent of 3.5 billion tonnes of material. The notional value of all contracts traded surged 32.8 per cent to $15.4 trillion (2010: $11.6 trillion).
“With a $15.4 trillion notional turnover on the Exchange, and 80 per cent of the market share in global metal futures transactions, the LME maintains its leading position in the global metals market”, said Martin Abbott, LME Chief Executive. “Our new contracts are also performing well as we see industry demand for risk management solutions increase”.
In December 2011 the LME announced plans to pursue its self-clearing project following the arrival of Trevor Spanner in November. LMEclear will bring to the members and shareholders all the strategic and financial advantages of clearing the LME’s own business.
A major upgrade to the Exchange’s electronic trading platform, LMEselect, was successfully launched in November to coincide with the LME’s proximity hosting service. With LMEselect volumes up 25 per cent year-on-year, the new faster service is likely to further stimulate volumes in 2012.
The LME Board agreed a new Exchange User Fee in December for members to levy on client trades with effect from 1 March 2012. The revenue from the new levy will enable the Exchange to accelerate its programme of commercial expansion while still operating a highly competitive service.
Future projects for 2012 include the introduction of LMEswaps for all non-ferrous contracts, which will be launched on 23 January 2012. The contracts are the first of their type to be traded on-exchange in the world and designed for participants of the physical industry who need to hedge the monthly average price with the added security of clearing.
The minor metals had a positive year with cobalt volumes hitting record levels in December, with 1,153 lots traded. LME Cobalt market open interest also reached a record of 500 lots by the start of January 2012. In total cobalt traded 6,578 lots in 2011, equivalent to 6,578 tonnes and $233.52 million. LME Molybdenum traded 513 lots, equivalent to 3,078 tonnes and $104.61 million.
LME Steel Billet saw another strong year with 219,163 lots traded, up 15% from 2010 (191,221 lots) and equivalent to 14.25 million tonnes and $8.02 billion. The contract won a prestigious annual award for innovation at the American Metal Market’s (AMM) Awards for Steel Excellence. With 52 brands listed and 72 LME-approved warehouses, the steel industry is increasingly recognising the value of the contract to help manage risk.
Among the established contracts LME Aluminium, LME Copper and LME Zinc were the three largest contracts by volume with 62.8 million (2010: 50.1 million), 37.9 million (2010: 33.1 million) and 23.0 million (2010: 18.8 million) lots traded respectively. LME Lead had the highest growth rate with a 40 per cent increase, while aluminium trading rose by 25.5 per cent year-on-year. Market open interest also reached record levels in December at 2.9 million lots.
Outright volume on 3-month contracts traded electronically during Asian trading hours (pre-7am) also rose by 33 per cent year-on-year, accounting for 14 per cent of 3-month outright trading on LMEselect in 2011. This surge in volume during Asian trading hours has been facilitated by the LME’s new office in Singapore.
LME-approved warehouses also had an active year with 28 per cent more stock deliveries year-on-year. A total of 6.16 million tonnes of stock turned over in 2011, with 3.59 million tonnes delivered in and 2.57 million tonnes delivered out.
The Exchange engaged Moelis & Co in September to advise on future strategy, either as a fully resourced and strong, independent entity or as part of a larger group. Potential suitors are preparing bids for the Exchange but it is too early to say whether the Board will recommend any bid to the shareholders.