LME sets October launch for Shanghai steel futures contract

The launch, announced on Wednesday, will mark the first time SHFE has made a metals price available for trading on another exchange, according to the LME.

“From next month, the LME will be providing the market with a straight-forward route to accessing what is widely regarded as the global benchmark for the flat steel sector, offering ease of access for offshore participants of the LME,” said MiRan Park, LME chief business officer, in a release.

Park added: “With an average bid offer of one tick, hundreds of lots quoted on each side and an average daily volume of almost 700,000 lots per day, the SHFE HRC contract is one of the most successful commodity contracts in the world.”

The cash-settled contract will reference the SHFE HRC renminbi price, converted into US dollars by Commodity Pricing and Analysis Limited (CPAL), a sister company of the LME.

SHFE HRC recorded average daily volume of 690,000 contracts in 2025, according to the LME.

LME targets international access to SHFE price

The LME first announced plans for the contract in June as part of a collaboration with SHFE aimed at giving international firms another route to manage exposure to China's steel market.

“By licensing the settlement price of SHFE HRC futures to the LME, we aim to provide Chinese and overseas companies engaged in global HRC trade with a more direct and effective risk-management tool, while further strengthening the links between China’s steel industry, the Shanghai price and global markets,” said Zhang Ming, executive vice president of SHFE, in a release.

The LME also published details on Wednesday of an incentive programme designed to support liquidity in the new contract on its LMEselect electronic trading platform.

The programme will focus quoting activity around the contract months with the greatest liquidity on SHFE and follows discussions with liquidity providers in China, Europe, the US and the Middle East.

Contract designed around SHFE liquidity

The exchange said the contract has been structured to reflect the liquidity profile of the underlying SHFE market, where trading volume and open interest typically shift from the front active month to the second active month around one month before expiry.

As a result, each LME monthly contract will settle against the following month's SHFE HRC contract. For example, the November 2026 LME contract will use the settlement price of the December 2026 SHFE contract.

The final trading day will generally be the 15th of each month, provided it is a business day in China, the UK and the US. Trading in the expiring contract will end at 08:00 London time, with matching and clearing required to be completed by 10:00.

CPAL will calculate and publish the final settlement price by converting the relevant SHFE daily settlement price from renminbi into US dollars.

The LME and parent HKEX Group established Dubai-based CPAL in October 2025 as a pricing administrator.

The launch comes after LME trading volumes fell 3.6% year on year in July, with average daily volume reaching 674,897 contracts. The exchange’s existing ferrous suite also declined, including a 52% drop in Steel HRC FOB China ADV to 261 contracts and a 30.7% fall in Steel Scrap CFR Turkey to 2,164 contracts.