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
Strategic Pathway: overview 2
LME Tin: a closer look
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 110 100 90 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 80 70 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 2018. 4
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 $30,000 45 % $28,000 40 $26,000 $24,000 $22,000 $20,000 $18,000 $16,000 $14,000 35 30 25 20 15 10 $12,000 5 $10,000 0 Cash price 30-day volatility (RHS) Source: LME. Data as of 30 Oct 2018. 5
Lots Thousands Development of LME volumes ADV Jan-Sep 2017: 619k lots ADV Jan-Sep 2018: 646k lots (ex. UNAs) 1,000 900 800 700 600 500 400 300 200 100 0 2015 2016 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Monthly UNA (2018) 2015 2016 2017 2018 MD carry fee discount introduced SD carry fee discount introduced 6
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 2017 2018 Source: LME. 7
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 140 140 +25% 120 120 ADV (Thousands) 100 80 60 +4% +9% ADV (Thousands) 100 80 60 40 40 20 YTD 18 20 - 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
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 900 95 Lots 1,600-19% 800 90 1,400 700 600 85 80 1,200-10% 500 75 1,000 400 70 800 300 65 600 200 60 400 100 55 200-50 - Q3 2017 Jan-Sep 2018 Q3 2017 Jan-Sep 2018 Monthly ADV Volume-weighted duration (RHS) Medium Carries Short Carries Source: LME; excluding UNAs. 9
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 1,000 500 500 500 - 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 2016 2017 2018 2016 2017 2018 2016 2017 2018 Source: LME Research. Data as of 24 Oct 2018. 10
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 $200 13 $150 $100 8 Backwardation $50 3 $0 -$50 -$100 Contango 2015 2016 2017 2018-2 -7 Source: LME Research 11
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% 2 10 50% 1 8 40% 0 6 30% -1 4 20% -2 2 10% -3 0 0% -4 Source: LME. Data as of 25 Oct 2018.. 12
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 1,345 27 1 0 0 2,261 3,752 Other 8,584 7,570 758 369 1,481 1,496 3,482 3,487 Total 9,807 8,915 785 370 1,481 1,496 5,743 7,239 Risk Reducing directly related to commercial activities (138) (85) 0 0 0 0 44 62 Other (869) (848) (69) (109) 97 195 (321) (474) Total (1,007) (933) (69) (109) 97 195 (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 2018. Combined Combined 31 44 Combined Combined 15 40 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 Millions tonnes traded Exchange tonnage traded Dominance of liquidity on the LME 1.2 Tonnes traded 1 0.8 0.6 0.4 0.2 0 LME Shanghai Source: LME, SHFE. Data as of September 2018. 14
Delivery roadmap
LME proposal on responsible sourcing Cobalt and Tin automatically higher-focus brands 16
Timeline Responsible sourcing 17
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 2019 1 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
LME Singapore Contacts William Fyfe Head of Singapore William.fyfe@lme.com Xu Xiao Head of Japan Xu.xiao@lme.com Edric Koh Head of Physical Markets Sales, Southeast Asia Edric.koh@lme.com Joe Vu Head of Financial Markets Sales, Asia Joe.vu@lme.com 19
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