Broker Freight Investor Services
and Chicago's CME Group expect further growth for steel, iron ore and coking
coal derivatives in 2012 and beyond, with efforts to boost transparency through
new screens ahead of regulation in the face of competition from Chinese and
other international exchanges.
Growing volume in the US Midwest
hot-rolled coil futures contract, which saw a record month on the CME in October
at 5,021 contracts cleared is generating interest for further expansion of
swaps & options trading in iron ore and coking coal.
Iron ore is taking the biggest
share of the new products, while coking coal should pick up rapidly as traders
are many of the same and players are already familiar and onboard with iron
ore, said James Oliver, a director in
CME's metals business.
Asia is seen predominantly as a
raw materials swaps-focused market, and FIS wants to show participants at
events in Beijing, Hong Kong and Singapore the virtues of hedging risk across
the whole steel value chain, the brokerage said
FIS will host seminars across
Asia and the Middle East in coming weeks to provide information on products and
hedging across raw materials and steel, with support from The Steel Index
(TSI), the Cleartrade platform and LCH Clearnet. TSI, owned by Platts,
publishes prices and is the basis of settlement for many steel and iron ore
swaps contracts that FIS brokers
The CME, FIS and Cleartrade all
seek trading a “virtual steel mill,” offering products in which every
major part of the steel value chain is able to be hedged on a forward curve.
Theoretically, this would provide
end-users and steel mills with procurement cost and price stability for inputs
and raw materials. But many in the industry remain on the sidelines, wary that
speculation and exchange-driven markets will lead to even greater volatility
and price instability.
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