London Metal Exchange Will Trade Molybdenum, Cobalt (Update1)

By Chanyaporn Chanjaroen and Claudia Carpenter

Sept. 4 (Bloomberg) -- The London Metal Exchange will start trading cobalt and molybdenum futures next year, offering manufacturers of iPods, laptops and steel products protection from price swings through an exchange for the first time.

The board approved both contracts at a meeting today and they begin in the second half, the exchange said in an e-mailed statement. The LME is the world's largest marketplace for copper.

The 131-year-old LME is seeking to double trading in five years. The exchange handled a record $9.5 trillion of futures and options in 2007, a third consecutive year of higher volumes partly as pension and hedge funds switched from the dollar and lower stock prices.

``It's great -- it will help guys like us get involved in such an important metal like cobalt,'' Lars Steffensen, managing director of commodity hedge fund Ebullio Capital Management LLP, said by phone from Southend-on-Sea, England. ``We'll start trading anything the LME offers once there's enough liquidity.''

Molybdenum, produced alongside copper, is used to toughen steel. Cobalt, used in rechargeable batteries, is a byproduct of nickel production. Prices for both metals have jumped in the last several years because of rising demand for steel and mobile electronic devices.

Cobalt rose to a record $52.25 a pound in March, and was at $35.25 a pound today, according to a cobalt sales Web site from BHP Billiton Ltd., the world's largest mining company.

Metal Inventories

``I'm absolutely in favor of a cobalt contract,'' said Derek Benham, president of New York-based BenMet NY, in a phone interview from Manchester, England, yesterday. Benham said he has traded cobalt for 20 years, and ``it's a lot easier with a futures market because you have inventories and you would be able to hedge just like any other metal on the LME.''

The European Union price of molybdenum oxide is $34 a pound, according to Metal Bulletin. Prices reached a record $40 in 2005.

``Anything that helps market pricing to be more transparent and reflective of demand/supply is positive,'' Rio Tinto Plc spokesman Nick Cobban said in an e-mail Sept. 2.