(Yicai) June 18 -- The London Metal Exchange will list the LME Steel Hot Rolled Coil Shanghai contract in October with a settlement price benchmarked on the Shanghai Futures Exchange's HRC futures, enabling global investors to directly reference and adopt Chinese steel prices for trading, hedging, and price discovery.

The SHFE signed a deal with the LME at the Lujiazui Forum in Shanghai yesterday, granting it the right to use the SHFE’s hot-rolled coil futures settlement price and supporting the launch of a futures contract linked to that benchmark, the Chinese exchange announced late on the same day.

The SHFE's HRC futures have become the world's largest for plate steel by trading volume, averaging about 700,000 lots a day and 1.9 million lots in open interest. They have become a key pricing reference for Chinese steel plate imports across the Asia-Pacific, the Middle East, North Africa, South America, and other regions.

The tie-up will broaden the international use of the "Shanghai price," draw steel firms and financial institutions worldwide into the price discovery process, and further enhance the global influence of China’s steel futures market, SHFE Chairman Tian Xiangyang said at a signing ceremony.

The deal is a concrete step by the SHFE to accelerate the opening-up of the capital market and accelerate the development of a world-class futures exchange, Tian stressed.

The cooperation will make it easier for companies outside China to access one of the world's most liquid commodity contracts, while retaining the convenience of trading the LME’s cash-settled contracts, said LME Chairman John Williamson.

The arrangement will also help round out the LME's cash-settled steel contract lineup and strengthen its ties with the world's largest metal-producing and consuming country, he added.

The SHFE will continue deepening its practical cooperation with international institutions, explore more approaches to opening-up, and give fuller play to the futures market’s functions, Tian noted.

China is the world's largest producer and consumer of HRC, with output reaching 325 million metric tons last year, accounting for 22 percent of the country’s entire steel production and the largest share of any steel product. Its exports topped 21.52 million metric tons, or about 20 percent of its total steel exports.

Editor: Martin Kadiev