* For other news from Reuters Global Commodities Summit, click on http://www.reuters.com/summit/COMMODITIES17
* LME plans to launch suite of contracts in one go in 18-24 months
* Room in the market for two paralell cobalt contracts
* Benchmark for cash-settled cobalt has to be IOSCO compliant
By Pratima Desai
LONDON, Oct 10 (Reuters) - The London Metal Exchange's new cobalt contract is likely to be for a chemical compound vital for the manufacture of the batteries used in the fast-growing electric vehicle sector, its chief executive Matt Chamberlain told Reuters on Tuesday.
Demand for that chemical -- cobalt sulphate -- is expected to soar over coming years as governments around the world set targets and timelines for electric vehicle sales in a bid to cut noxious emissions from fossil-fuelled cars.
The exchange is planning to launch a suite of contracts including cash-settled cobalt sulphate, lithium, hot rolled coil steel, alumina and aluminium contracts in one go in 18 months to two years.
The cobalt contract currently traded on the exchange is for physically settled refined metal, often used in superalloys that go into jet engines, launched in 2010.
"There is room in the market for two parallel contracts. One for cobalt metal and the second a chemical, so probably cobalt sulphate," Chamberlain told the Reuters Global Commodities Summit, adding the exchange was talking to battery and electric vehicle makers.
"They've approached us because the industry needs some coordination in terms of how benchmarks are going to emerge. You don't want to embed benchmarks that are not going to be hedgeable or tradeable in the future.
The consultation with the industry will include a round table discussion during LME Week, an annual industry gathering starting on Oct. 30.
"A good proportion of those who have announced electric vehicle projects have expressed a desire to be involved," Chamberlain said.
"They all want to differentiate on how sleek their cars are, but they have a very common set of challenges in terms of sourcing the materials."
One prominent example is Volkswagen, which is planning to invest more than 20 billion euros ($24 billion) in zero-emission vehicles by 2030 and make three million EVs a year by 2025 to challenge pioneer Tesla in creating a mass market.
Cobalt, a byproduct of copper and nickel output, boosts energy density and extends the life of rechargeable batteries. This allows automakers to offer guarantees between eight and 10 years.
Cash-settled contracts are typically settled against benchmark prices gathered from the physical market.
"With benchmarks the first step is to understand what is embedded in industry contracts, " Chamberlain said. "For battery chemicals that's lithium, cobalt sulphate and possibly even nickel sulphate."
Any benchmark will have to conform with principles set out by the International Organization of Securities Commissions (IOSCO), which aim to protect investors, reduce systemic risk and ensure markets are fair efficient and transparent.
"We have a pretty robust process, we're working with users and benchmark providers to help find benchmarks which can be traded and which will get through the IOSCO process," Chamberlain said.
"We haven't made a decision yet," he said adding that the decision will be made with battery and electric car makers.
Benchmark Mineral Intelligence already offers price data and analysis for raw materials such as lithium, graphite, cobalt and nickel used in the rechargeable lithium-ion batteries.
Metals consultancy CRU Group is looking at creating a price index for cobalt sulphate.
CRU consultant George Heppel expects global demand for cobalt metal at nearly 136,000 tonnes in 2021 and more than 161,000 tonnes in 2025 from roughly 102,000 tonnes this year.
Demand for batteries used in electric vehicles and mobile appliances is expected to account for 46 percent of that in 2021, up from about 40 percent this year.
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(Reporting by Pratima Desai; Editing by Veronica Brown and David Evans)