London Metal Exchange, Singapore Exchange Start Metals Futures

The London Metal Exchange and Singapore Exchange Ltd. will begin trading copper, zinc and aluminum futures on the Singapore bourse tomorrow.

The dollar-denominated LME-SGX Metal Futures will start at 8 a.m. Singapore time and will be traded and cleared on the SGX. Each contract will represent five metric tons of metal, compared with the benchmark 25-ton contracts traded in London. The Singapore Exchange is also consulting the public on the introduction of lead, tin and steel-billet futures.

The LME is expanding in Asia as demand accelerates. Asian trading of the bourse’s benchmark three-month contracts increased to 14 percent of total volume on the Select electronic system, from 10 percent in 2009. The exchange launched Asian benchmark prices for copper, aluminum and zinc on Jan. 24 and opened an office in Singapore last year.

“I think the speculative interest is out there and easier access might open doors to those participants,” Phil Boeding, managing partner at GS Energy Partners LLC, one of the market makers for the five-ton contracts.

Consumption of metals by China, the world’s largest user, helped drive a 24 percent rally in the LME Index of six industrial metals last year. Copper for three-month delivery jumped to a record $10,160 a ton on Feb. 7 on expectations that supplies will trail demand this year. Copper is often seen as an economic indicator as it is used in construction and electrical applications.

“Investors have become more sophisticated and recognize the need to diversify not only among equities, but among asset classes,” said Mitchell Tourle, commodity derivatives trader at Susquehanna Pacific Pty Ltd., another market maker for the LME- SGX futures.

China Growth

China’s economy grew 10.3 percent in 2010 even as policy makers stepped up measures to curb property speculation and accelerating consumer prices. That’s the fastest pace in three years and compares with growth of 9.2 percent in 2009. The World Bank expects the economy to expand 8.7 percent in 2011.

The LME-SGX metal futures replicate the specifications of the LME’s own reduced-sized contracts known as LMEminis. They will be cash-settled based on the LME official cash settlement price and will trade in two sessions, from 8 a.m. to 3:20 p.m. and from 4 p.m. to 2 a.m. Singapore time.

“Exchange-traded base metals volumes have exploded in Asia in the last few years with good interest from commercial users, especially overflow from the active Shanghai market,” Tourle said.