New contract gives access to US scrap
derivatives for the first time
Leading
iron ore and steel broker Freight Investor Services (FIS) brokered the first US
scrap swap on Monday this week (10 September 2012). On the first day these
contracts were made available for clearing through CME Group.
The new US Midwest No 1 Busheling Ferrous Scrap
swaps contract is the first US ferrous scrap derivatives contract available to
steel industry participants and is settled against the American Metal Market's
US Midwest Ferrous Scrap Index.
US crude steel production totalled 86 million
tonnes in 2011, with around 60 per cent coming from scrap. In addition, the US
is the world's biggest scrap exporter, supplying over 20 per cent of the
world's scrap requirements.
“We have had a large amount of interest from
our clients in US domestic scrap swaps. The US scrap market peaked at $520 per
ton in January and has fallen to $391/t today, a 25% drop. This demonstrates
the importance of market participants hedging their risk in this volatile
environment. Combined with our existing US HRC and Turkish
scrap contracts, producers now have the ability to manage this price risk both
domestically and on an international level”, Sam Mehew, Senior Steel Swaps Broker, Freight Investor Services, said.
“Steel trader Kataman Metals was one of the
counterparties to Monday’s trade, with Macquarie Bank acting as a General
Clearing Member”, Brad Clark, Kataman's Director of Steel and Scrap Trading,
said.
“Kataman Metals is very excited about this
new ferrous scrap contract. The complement with the existing HRC contract
should help both contracts grow in liquidity. The need for price risk
management tools in this extremely volatile ferrous scrap market makes this
contract a welcome addition to those looking to hedge their risk”, he added
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