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Steel mills warming to LME steel scrap & rebar contracts-The 19th China(Guangzhou)Int’l Metal &Metallurgy Exhi
bition

8/23/2017  金属展-冶金展-钢铁展-steel expo-metal &metallurgy expo
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    Reuters reported that many steel mills, which had largely shunned using steel futures, are becoming more open to hedging and have been experimenting with London Metal Exchange contracts in recent months. The LME''s steel scrap and rebar contracts have steadily gained volumes since their launch in November 2015, but traders and merchants had been the most active users while steel makers were against the contracts.

Reuters they would not be using the contracts, while others such as Germany''s ThyssenKrupp had said they would take a wait-and-see approach.

Mr Alberto Xodo, deputy head of LME ferrous, told “There has been a fundamental shift in the attitude of steel mills. In recent months our client base has expanded to include even the more conservative participants of the value chain, like the steel mills."

He said "Given the very high volatility of steel prices in recent years, many of them steel mills are now exploring ways to integrate hedging in their operations. We have already seen mills from several countries making enquiries around hedging steel prices with LME futures and many are even dipping their toes by doing test trades."

Mr Xodo added that the LME had received requests to launch other ferrous contracts, especially in hot rolled coil and this was included in a wide-ranging LME discussion paper. The results of the discussion paper are due to be released next month.

August is set to mark record volumes, with 229,110 tonnes of scrap and 50,600 tonnes of rebar traded in the first half of the month. Those half-month tonnages for August were close to the full month totals for July, which were 259,040 tonnes of scrap and 52,210 tonnes of rebar. The July volumes represented a surge of 42% and 66% respectively from June.

The success of the LME contracts is in stark contrast to the previous LME physically-delivered steel billet contract, which the LME scrapped in April after failing to trade since June 2015. One reason the new contracts have gained momentum is because they are monthly and cash-settled. -The 19th China(Guangzhou)Int’l Metal &Metallurgy Exhibition
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