Steel futures are possible
By Staff -- Purchasing, 7/14/2007 2:00:00 AM
Futures contracts have been used as hedges against price/supply volatility in the nonferrous and precious metals markets for more than a century. Futures are traded on exchanges that are anonymous public auctions with prices on public display; in effect, the markets perform the important functions of price discovery and supply assurance. There is no such exchange-based pricing transparency for steel, yet. But, the London Metals Exchange (LME) and the Dubai Gold and Commodities Exchange are revisiting the possibility of global trading in steel futures later this year. The industry is split on the subject, however. About 40% of those polled at a June steel conference saw futures covering a volume of 25 million tons/year, and another 25% of respondents think steel futures could cover a volume of 400 million tons/year, but about 35% see "minimal" industry use with "no traction" in global steel markets. However, a 10 million ton/year foothold for flat-rolled steel-derivative swaps already is being established in the U.S., says Jeff Kabel, vice president of London-based Koch Metals Trading.
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