New LME Alumina Contract To Utilize CRU Alumina Price Index

New LME Alumina Contract To Utilize CRU Alumina Price Index

London commodities consultant CRU Group said yesterday that the London Metal Exchange will soon be using the firm’s CRU Alumina Price Index (CRU-API) in the settlement of the LME’s new cash-settled Alumina futures contract.

The new futures contract is set to commence trading on March 11 and will use the CRU-API to settle physical contracts from the outset of trading. The CRU-API is widely used to settle physical alumina contracts around the world, as it samples what it believes are representative alumina trades executed all along the supply chain.

CRU Head of Prices Development Chris Houlden expressed the firm’s satisfaction at being chosen by the LME for use in its new contract.

“CRU’s reputation for integrity, reliability, independence and authority applies equally to its leading price assessments and market analysis, and not least the Alumina market and the CRU-API. We are therefore delighted to work with the LME on this new contract at a time when unpresented market volatility has highlighted the need for additional risk management tools.”

Robin Martin, Head of Market Development, LME Group, explained that the new contract is designed to attract new players to the market, including those seeking a simpler, more approachable process.

“We are delighted to announce CRU as one of the index providers for our new cash-settled futures contracts, which is the next step in delivering our new products strategy and an important part of our commitment to deliver greater user choice. The introduction of new contracts is a strategically important growth driver for the LME. We believe that these new cash-settled contracts will complement our existing product offering and the simpler settlement mechanism will help lower barriers to market entry. This will attract new players to the market who can benefit from using LME hedging to better manage their price risk in the physical metals market.”

According to CRU, the CRU-API (Australia FOB alumina) is a transaction-only weekly price benchmark that, due to the use of only transaction data, screens out subjective data including sentiment, errant opinion, and speculative data.