Two years since its launch in December 2020, the Cobalt Metal (Fastmarkets) Futures contract has firmly established itself as a risk management tool in the electric vehicles (EV) and broader industrial metals space. Learn more with five charts that illustrate this growth.
Open Interest surpasses 10,000 tons and half a billion $ notional value
Open interest measures the quantity of open positions in a contract, or the amount of firms that have long or short positions. CME Group Cobalt has shown continuous growth in open interest, recently surpassing the 10,000 tons threshold. The notional value of these open positions, based on current spot prices, crossed the $500 million value threshold at around the same time – meaning that more than half a billion-dollar notional is now tied to the CME Group Cobalt contract.
Chart 1: Open Interest in tons and $m notional equivalent
November sets a new volume record
While trading activity went through peaks and troughs, the overall growth trend is clear. November 2022 is a record month at 149 tons traded per day on average. Trading in CME Group Cobalt is done almost exclusively through the OTC brokered market rather than on screen. Many interdealer brokers now offer their brokerage services in CME Group Cobalt (see list of active brokers here).
Chart 2: Trading activity in CME Group Cobalt
Active trading all the way to 2025
Market participants have made full use of all listed contract maturities, with trading activity extending out to December 2025, or 3 years forward. As of late November 2022, 48% of open interest sits in 2023 calendar months, 34% in 2024, and 11%, or just over 1,200 tons, in 2025. On average, trading in the contract is typically 12 – 18 months forward and usually takes the form of quarterly, half-year, or calendar year clips.
Chart 3: Weighted average maturity of executed trades in months
20 participants on average and EV metals indexation
As a result of this increased activity, more participants than ever are now trading CME Group Cobalt. The average number of active participants each month has grown from 5 – 10 firms to around 20 in the second half of 2022. The range of participants is diverse, including commodity merchants, banks, and funds. Commodity index providers refer to the CME Group product to track cobalt prices within newly created EV metal indices, including the S&P GSCI Electric Vehicle Metals index and the Bloomberg Electrification Metals Index. Two recently launched ETFs are benchmarked to these indices: the Invesco EVMT (against S&P EV Metals) and Kraneshares KMET (against the Bloomberg Electrification Index).
Chart 4: Unique participants in CME Group Cobalt
Contract now included in the CFTC Commitment of Traders report
Starting in late November, the U.S. futures market regulator, the CFTC, has started publishing cobalt futures data in its weekly Commitments of Traders report (the “CoT” report). This data allows existing and potential users of the contract to analyze open interest data at a granular level. The report shows how many contracts are held by commercial clients (called Producers, Merchants, Processors, or Users in the CoT report), swap dealers (typically banks), managed money (commodity trade advisors, hedge funds, etc.). The first report details that commercial clients hold short positions in CME Group Cobalt (-2,500 tons), while swap dealers are long 3,700 tons. Managed Money, which includes commodity speculators, are net long cobalt (+2,400 tons). The CFTC Commitments of Traders Report is published weekly.
Chart 5: CFTC CoT Report for CME Group Cobalt as of Nov 22, 2022
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All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.