This means that moly will be able to hedge their production....

This means that moly will be able to hedge their production. This is fantastic - further de-risks the project.

London Metal Exchange to Consider Molybdenum, Cobalt Futures

By Claudia Carpenter and Chanyaporn Chanjaroen

Aug. 29 (Bloomberg) -- London Metal Exchange, the world's largest marketplace for industrial metals, may decide next week to begin trade in cobalt and molybdenum futures as prices surge for the raw materials used in iPods, laptops and steel products.

Commercial Director Liz Milan will on Sept. 4 propose the board introduce the contracts, the first for the metals on any exchange, by mid-2009, said Chris Evans, new products manager. A decision is expected the same day, he said. Molybdenum, produced during copper manufacture, is used to toughen steel, and cobalt used in rechargeable batteries comes from nickel production.

``We've seen a lot of interest from industry participants, from miners through to consumers and traders,'' Evans said in an interview today. ``Molybdenum and cobalt are byproducts of metals that already trade on the exchange so launching them should be considerably easier.''

The two metals have leapt in recent years, attracting the attention of investors, on rising demand for steel in Asia and mobile electronic devices worldwide. Output of the materials is dwarfed by metals such as aluminum. Molybdenum production totals about 190,000 metric tons a year and cobalt about 55,000 tons, Evans said. Aluminum output is about 40 million tons a year.

Some producers and suppliers say the introduction of the futures contracts will increase price volatility.

The trade ``serves no purposes other than attract pension funds and other people who should not be in the minor metals markets,'' said Anthony Lipmann, managing director of Walton-on- Thames, England-based Lipmann Walton & Co. Ltd., a supplier of cobalt and molybdenum. ``When things are going bad for them elsewhere they'd just flee the markets, causing a price slump.''

Price Collapse

The price of palladium has collapsed 35 percent since the end of June as speculative investors dumped the metal, he said.

Minor Metals Trade Association Chairman Charles Swindon in London declined to comment, saying the association prefers to wait for the LME decision. The MMTA has 115 members representing producers, consumers and trading companies of minor metals.

Credit Suisse Group, Switzerland's second-largest bank, began offering cash-settled swaps in off-exchange metals such as molybdenum and cobalt in August 2007. Hedge funds and pension funds are among the bank's clients, as well as producers, consumers and physical traders, according to Kamal Naqvi, head of fund coverage at the bank's commodities team in London.

To contact the reporters on this story: Claudia Carpenter in London at [email protected] or [email protected]; Chanyaporn Chanjaroen in London at [email protected]