The LME Strategic pathway: how the exchange will continue to support the tin market

Transcription

1 Public The LME Strategic pathway: how the exchange will continue to support the tin market 6 th Annual Beer & Co. Tin Conference November 2018 SETTING THE GLOBAL STANDARD

2 Strategic Pathway: overview 2

3 LME Tin: a closer look

4 A volatile market and trade war concerns LME 3M prices since start of the year 130 AH ZS NI CA PB SN US extends deadline for some sanctions 120 Nickel Aluminium 30% tariff placed by US on solar panels Tariff order signed by the US for 25% on steel and 10% on aluminium US imposed 20% and 50% tariffs on respectively aluminium and steel imports from Turkey Copper Tin Lead US Imposed sanctions on Rusal 25% tariffs imposed by US on $34bn of Chinese goods; China imposed retaliatory tariffs of same value Zinc 60 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Source: LME. Data as of 19 October

5 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 Sep-18 LME Tin Cash price Volatility reaching historical lows $30, % $28, $26,000 $24,000 $22,000 $20,000 $18,000 $16,000 $14, $12,000 5 $10,000 0 Cash price 30-day volatility (RHS) Source: LME. Data as of 30 Oct

6 Lots Thousands Development of LME volumes ADV Jan-Sep 2017: 619k lots ADV Jan-Sep 2018: 646k lots (ex. UNAs) 1, Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Monthly UNA (2018) MD carry fee discount introduced SD carry fee discount introduced 6

7 Lots LME Tin volumes Average Daily Volume 7,000 Monthly UNA (2018) 6,000 5,000 4,000 3,000 2,000 1,000 - Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Source: LME. 7

8 Volume development following fee discounts The LME introduced fee discounts for short and medium-dated carries in October and November 2017 respectively The LME now publishes a breakdown of short and medium-dated carry volumes (ex UNA trades) in its monthly report to show the impact of the fee changes on carry volumes 160 Short-dated carry 160 Medium-dated carry % ADV (Thousands) % +9% ADV (Thousands) YTD Jan-Sep 17 (pre-discount) Jan-Jul 18 - Jan-Oct 17 (pre-discount) Jan-Jul 18 NB Volumes fluctuate due to many different factors, therefore the impact of fee changes on carry volume should be seen as indicative only. 8

9 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 ADV (lots) Day Tin carry update Long carries Medium and short carries Lots 1,600-19% , ,200-10% , Q Jan-Sep 2018 Q Jan-Sep 2018 Monthly ADV Volume-weighted duration (RHS) Medium Carries Short Carries Source: LME; excluding UNAs. 9

10 Surge of open interest on quarterly prompt dates June Lots 5,000 September Lots 5,000 December Lots 5,000 4,500 4,500 4,500 4,000 4,000 4,000 3,500 3,500 3,500 3,000 3,000 3,000 2,500 2,500 2,500 2,000 2,000 2,000 1,500 1,500 1,500 1,000 1,000 1, J F M A M J - J F M A M J J A S - J F M A M J J A S O N D Source: LME Research. Data as of 24 Oct

11 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Average Cash - 3M Spread Number of participant/day holding more than 80% of LME Warrant holdings, Cash and Cash plus one day positions as a percentage of live stock LME Tin spread Concentration of warrants and backwardations $250 Average of Spread Sum of >80% 18 $ $150 $100 8 Backwardation $50 3 $0 -$50 -$100 Contango Source: LME Research 11

12 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Tonnes Thousands Tonnes Thousands LME Tin stocks Closing stocks up 30% year-to-date %age cancelled stocks Deliveries 14 Closing Stock % Cancelled (RHS) 70% 3 Delivered In Delivered Out Net 12 60% % % % % % % -4 Source: LME. Data as of 25 Oct

13 Commitments of Traders Report (Tin) Notation of the position quantity LOTS Investment Firms or credit institutions Investment Funds Other Financial Institutions Commercial Undertakings Long Short Long Short Long Short Long Short Number of Positions Change since the previous report (+/-) Risk Reducing directly related to commercial activities 1,223 1, ,261 3,752 Other 8,584 7, ,481 1,496 3,482 3,487 Total 9,807 8, ,481 1,496 5,743 7,239 Risk Reducing directly related to commercial activities (138) (85) Other (869) (848) (69) (109) (321) (474) Total (1,007) (933) (69) (109) (277) (412) Percentage of the total open interest Risk Reducing directly related to commercial activities 6.86% 7.46% 0.15% 0.01% 0.00% 0.00% 12.69% 20.82% Other 48.18% 42.01% 4.25% 2.05% 8.31% 8.30% 19.54% 19.35% Total 55.04% 49.47% 4.40% 2.06% 8.31% 8.30% 32.23% 40.17% Number of people holding a position in each category Total Source: LME, Data as of 19 October Combined Combined Combined Combined

14 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 Sep-18 Millions tonnes traded Exchange tonnage traded Dominance of liquidity on the LME 1.2 Tonnes traded LME Shanghai Source: LME, SHFE. Data as of September

15 Delivery roadmap

16 LME proposal on responsible sourcing Cobalt and Tin automatically higher-focus brands 16

17 Timeline Responsible sourcing 17

18 LME is building dynamic product launch capabilities Allowing faster launch of new products to better respond to changing market demands. Commercial launch of first eight contracts targeted for early Market engagement Contract design Build, test & regulatory approval Launch Promotion & education Non ferrous US DUP Aluminium Premium? European Aluminium Alloy? MJP Aluminium Premium European DP Aluminium Premium US Aluminium Premium European DUP Aluminium Premium Alumina Hot Rolled Coil North America Ferrous Option contracts? Hot Rolled Coil Northern Europe Hot Rolled Coil FOB China Steel Scrap Steel Rebar EV metals Nickel Sulphate Premium? Other cathode or anode materials? Lithium (carbonate and/or hydroxide) Cobalt Minor metals Molybdenum 1. Subject to regulatory approvals and consultation on LME / LME Clear Rulebook amendments 18

19 LME Singapore Contacts William Fyfe Head of Singapore Xu Xiao Head of Japan Edric Koh Head of Physical Markets Sales, Southeast Asia Joe Vu Head of Financial Markets Sales, Asia 19

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