Cobalt is a key material in the manufacturing of batteries for electric vehicles and portable devices such as laptops and mobile phones. In addition, its physical properties, including heat and corrosion resistance make it a useful product in applications such as aerospace engineering and super alloys. Specifically, cobalt hydroxide is chemically refined into battery-grade cobalt sulphate, which is used in battery manufacturing. Due to its many applications, it is expected that the green energy transition will increase demand for cobalt substantially over the years to come.

With this futures contract, CME Group allows you to forward hedge your cobalt hydroxide price risk using a centrally cleared, cash-settled, financial instrument. This also means that this product lets you manage your commodity price risk separately from your physical business. Cobalt Hydroxide CIF China (Fastmarkets) futures can be a cost-efficient hedging tool to protect profit margins and minimize risk.

Cobalt Hydroxide CIF China (Fastmarkets) futures are available for up to four years forward, thereby establishing a forward price curve and enabling long-term hedging strategies.

The underlying Fastmarkets assessment, cobalt hydroxide, min 30% Co, inferred, China, $ per lb captures the inferred price of cobalt hydroxide on a CIF (“cost-insurance-freight”) China delivered basis. The price is inferred based on the cobalt metal standard-grade assessment (low-end of daily range) value multiplied with the cobalt hydroxide CIF China payable indicator.

The payable indicator is a percentage value of the cobalt standard-grade price. This “percentage value of standard-grade” pricing structuring is the most common way in which cobalt hydroxide is typically transacted in the physical spot markets.

More information on the assessment methodology is available on the Fastmarkets website.

No, the Cobalt Hydroxide CIF China (Fastmarkets) futures contract will be enabled for trading alongside the existing and actively traded Cobalt Metal (Fastmarkets) futures contract. The existing contract settles against the cobalt standard-grade metal price (basis in-warehouse Rotterdam) and the new contract will settle against the assessment for Cobalt Hydroxide CIF China – therefore the two products price against a different type of cobalt and physical delivery locations. The prices have historically shown a high degree of positive correlation, but different supply and demand factors will influence the two prices separately.

The Cobalt Hydroxide contract is made available for trading with a unit of measure of $ per pound. One contract unit represents 2,204.62 pounds, the equivalent of one metric ton. The unit size was chosen to reflect standard trading terms in the physical cobalt market in which cobalt hydroxide is priced on a $/lbs cobalt content basis in metric ton unit sizes.

Market participants seeking a central point of price discovery, price transparency, and risk management use our products. The contract should be of interest to miners, refiners, OEMs, as well as merchant traders. It will allow finer granularity in trading cobalt on exchange, as both cobalt metal and cobalt hydroxide will be available for trading on CME Group. In addition, the contract will allow financial market participants access to the cobalt market without having to manage a physical book.