A new way to manage cobalt price risk
To meet the growing need for efficient risk management, CME Group has launched Cobalt Metal (Fastmarkets) futures and options. The rapid growth of electric vehicles and large-scale battery storage applications is expected to drive increasing demand for cobalt – and with it, greater price risk. The contracts are financially settled based on the monthly average of the assessments published by Fastmarkets each business day of the contract month.
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Features and benefits
A centralized marketplace provides better opportunity for price discovery and transparency.
Flexible trade execution
Hedge using a centrally cleared instrument, mitigating counterparty credit risk.
Trade from anywhere in the world via the electronic CME Globex platform. Get cobalt market access without having to manage physical delivery.
Explore this product in depth
Download the Cobalt Trading Grids for CME Direct
- Right click on the buttons below
- Save the files as an .XML on your computer
- In CME Direct, select import view in the main menu
- Import the grid into CME Direct
Learn how you can use Cobalt futures to hedge price risk, protect profit margin or access more market opportunities.
On November 3, a cobalt consumer agrees to buy five tons of cobalt metal from a refiner at the current Cobalt Metal (Fastmarkets) December average. The consumer then can use Cobalt futures to hedge their risk on this purchase, buying five December futures contracts at the current price.
At the end of December, when the average of the month has been established, the consumer does not have to trade out of their long position, as it is cash-settled against the monthly average upon expiry. Upon final settlement, a debit or credit will be made to the consumer’s account, accounting for the difference between the initial COB price and the final spot average price for December.
A battery manufacturer signs a long-term cobalt hydroxide term purchase agreement at a fixed discount to the Fastmarkets average price for standard grade cobalt for each month of the term agreement. The battery manufacturer agrees to sell its output at a fixed price to an EV car company and is now exposed to an increase in the cobalt price during the term agreement.
To protect its margin, the manufacturer can buy a strip of monthly Cobalt Metal futures with a tonnage equivalent to the hydroxide term purchase agreement. Thanks to the financial hedge, the battery manufacturer has now locked in a margin between the selling price and the raw material input cost.
A merchant trader sits on cobalt inventory with no certainty of when they will be able to sell it. The trader worries that a decrease in cobalt prices will reduce the value of their inventory.
By selling Cobalt Metal futures against their inventory, the trader can protect their stock against a decrease in prices. The futures contracts held short can be bought back progressively as the material is sold in the physical market.
The Fastmarkets assessment is for Cobalt standard-grade, in-whs, Rotterdam, $/lb (code MB-CO-0005). This assessment tracks the price of standard grade cobalt metal. The Cobalt Metal futures final settlement is based on the mid-price of the daily range published by Fastmarkets.
The underlying Fastmarkets assessment for standard-grade cobalt metal in-warehouse Rotterdam serves as the key industry reference point for pricing cobalt across the supply chain. More information about the Fastmarkets methodology is available here.
Starting December 14, Cobalt futures will be available to trade on-screen via CME Globex and for submission for clearing through CME ClearPort. More information about CME ClearPort registration is available here.
Contact your clearing member or email@example.com to get more information on getting set up to trade the contract on CME Globex and/or as a block trade on CME ClearPort.
There are minimum quantity and reporting time requirements for Cobalt Metal block trades. The minimum block trade size is two (2) contracts, and trades need to be reported by the broker within 15 minutes of execution.
These contracts are subject to the rules and regulations of COMEX.
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