Record daily volume traded on CME cobalt forward contracts

Cobalt forward contracts on the Chicago Mercantile Exchange (CME) hit new highs for volume and open interest during trading on Tuesday January 17

A volume of 1,369 tonnes dwarfed the previous record set on October 12, 2022, at 756 tonnes, with the volume for January 18 at 1,061 tonnes.

Open interest also breached a significant point for the contract, with 15,129 tonnes of open interest at Tuesday’s close.

Trades were reported at prices in ranges of $16.95-18.80 per lb on Tuesday and $18.05-20.50 per lb on Wednesday. Activity across the two days covered the period from February 2023 all the way out to June 2025.

The contract is based on the midpoint of Fastmarkets’ price assessment for cobalt, standard grade, in-whs Rotterdam. The daily assessment was $17.40-18.25 per lb on January 19, unchanged from January 18.

CME Group has established itself as the venue of choice for managing battery metals risk, as evident by momentum across our cobalt and lithium contracts,” Jin Chang, managing director and global head of metals at CME Group, said.

“Open interest in our cobalt contract has surpassed 16,000 contracts and extends all the way out to December 2025, while we have also seen multiple volume records to start the year,” she added. “We will continue to be responsive to evolving risk management needs, and scale liquidity quickly to the benefit of the metals industry.”

The use of the futures contract for cobalt has been a popular feature for market participants, with the ability to hedge business decisions several years ahead. Fastmarkets has published risk management insight examining this for the cobalt market.

“From our perspective, we see a lot of the bid side coming from end-user hedging, with the drop in [the cobalt metal] price provoking lots of deferred interest,” Robin Tisserand, battery metals broker at SCB Brokers, said.

“We’ve worked on some structure trades, with some [market] participants responding very well to some strong trends emerging as the market prices-in a recovery quite far out the curve,” he added. “So we see quarterly spreads trading and receiving good interest from financial [market participants], while also providing excellent hedging opportunities deferred for producers.”

Cobalt futures market attractive to automotive sector

Automotive companies have had particular interest in the cobalt futures market, according to some market participants.

“All this buying seems linked to [original equipment manufacturers], but we’ve heard that no one needs cobalt, right?” one trader said, jokingly.

This flurry of activity has prompted cobalt metal futures to move from a period of backwardation into contango, with daily settlement prices increasing.

“The spot market is quiet at the moment from a liquidity perspective, but the futures market has a lot of open interest, so I can see why people get involved,” a second trader said.

On the spot market, the price of cobalt standard grade ended 2022 down by 51% from highs seen a year earlier, following weak spot demand, a bearish global macroeconomic picture, and forecasts of a supply surplus in 2023.

Some traders’ opinions were divided about what this futures activity could mean for the physical cobalt metal market.

“The market is trying to assess the effect of this buying frenzy on the CME, because there was a lot of volume traded at increasingly higher numbers,” a third trader said.

“The spot market mood is more bearish than bullish at the moment,” a fourth trader said. “We’ll see what happens after the Lunar New Year [holidays at the end of January].”

Use Fastmarkets price data to settle against exchange-traded commodity derivative contracts.

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