19/01/17 – The LME issued a notice detailing amendments to its Special Contract Rules For Cobalt (Part 6 of the LME’s Rulebook).
The key amendments are:-
- To Special Contract Rule 1a) for cobalt changing the minimum purity of cobalt delivered under the LME Cobalt contract from 99.30% to 99.80% with effect from 19 January 2018.
- To Special Contract Rule 1b) for cobalt relating to the deliverable shapes under the Contract which will be effective from 19 April 2017.
A copy of the LME’s notice is as follows:-
“To: All members, warehouse companies and their London agents
Date: 19 January 2017
Subject: AMENDMENTS TO SPECIAL CONTRACT RULES FOR COBALT
1. This notice details the amendment to Special Contract Rule 1a) for cobalt changing the minimum purity of cobalt delivered under the LME Cobalt contract (the “Contract”) from 99.30% to 99.80% with effect from 19 January 2018.
2. This notice also details amendments to Special Contract Rule 1b) for cobalt relating to the deliverable shapes under the Contract which will be effective from 19 April 2017.
3. Since its launch in 2010, the Contract has increasingly been adopted as a reference price and hedging tool for the global physical cobalt industry, with the LME price now embedded into a large number of physical supply contracts. In particular, the Contract has experienced a significant increase in volumes and open interest in recent months. In the 4th quarter of 2016, the contract traded 5,035 lots, representing almost a 6-fold increase compared to the same period in 2015. Market open interest also reached a high of 815 lots during this period.
4. The LME believes that the increase in purity to 99.80% will further assist in Contract adoption, given the LME’s understanding that many physical participants make use of higher-grade cobalt, and would most naturally look to price on this basis.
Background to Amendment to Special Contract Rule 1a)
5. The LME Executive Committee has accepted a recommendation from the LME Cobalt Committee to increase the minimum purity of cobalt delivered under the contract from 99.30% to 99.80%. This follows the cessation of production of NORILSK K1A and NORILSK K1AY brands, which are the only LME-listed brands with a minimum cobalt content of 99.30% (please see Notices 16/390
and 16/391 concerning the current listing status of NORILSK K1A and NORILSK K1AY brands).
Clarification of Process for Amendment to Special Contract Rule 1a)
6. In order to increase the minimum cobalt purity of the Contract from 99.30% to 99.80%, any LME-listed cobalt brands that have a cobalt content of less than 99.80% will not be accepted for LME warranting with effect from 19 October 2017. Therefore, no further deliveries of listed cobalt brand GOLDEN CAMEL 9965 will be accepted for LME warranting with effect from 19 October 2017. The last date for warranting GOLDEN CAMEL 9965 brand will be 18 October 2017, and if warrants are cancelled on or after 19 October 2017 it will not be possible to place the metal back on warrant, either at the same LME-listed warehouse company or another LME-listed warehouse company in any LME-listed location.
7. Any GOLDEN CAMEL 9965 warrants remaining in warehouse on 19 January 2018 will need to be removed from LME stock.
8. In addition, any remaining LME warrants of the following suspended or delisted brands will also need to be removed from LME stock by 19 January 2018: TOCANTINS CHEMICAL GRADE 99.7%, TOCANTINS COBALT METAL GRADE 99.65%, NORILSK K1A, NORILSK K1AY and MCMV9C.
9. On or before 19 January 2018, warrant holders will be required to remove any affected warrants in the Depository and return them to the warehouse company’s London agent in order to effect cancellation of the affected warrants and their removal from LME stock. Metal owners can then make their own private arrangements with the relevant warehouse company regarding the storage of their cobalt metal.
10. In order to assist warrant holders, after the allocation of warrants has been completed on the 18 January 2018, the LME will contact any warrant holders of the aforementioned brands to reaffirm the need to remove the warrants from the Depository for cancellation. Any warrants remaining in LMEsword at close of business on 18 January 2018 will be invalidated by the LME in order to meet the removal requirements for 19 January 2018.
Amendments to Special Contract Rule 1b)
11. The amendments that have been made to Special Contract Rule 1b) are:
a. Cut cathodes must be of uniform size not greater than 50mm and offcuts are not permitted;
b. Coarse grain powder must be <0.01% of a respirable size fraction. Additionally, the date this shape was added to the Contract has been removed.
12. The rulebook will be updated with these changes on 19 April 2017.
13. Any queries about the contents of this notice should be addressed to Robert Hall, Head of Physical Operations at firstname.lastname@example.org.
Robert Hall Head of Physical Operations
cc: Board directors Cobalt Committee
Physical Market Committee Warehousing Committee”