During a panel moderated by Alberto Xodo, product specialist at London Metal Exchange, at the SteelOrbis 2026 Spring Conference & 94th IREPAS Meeting taking place on April 26-28 in Amsterdam, the panelists John Short, CEO of Boomer Commodities, and Philip Price, founder of Pool, highlighted the growing role of steel derivatives in risk management, liquidity creation and trade finance.
The panelists agreed that the market has evolved significantly over the past decade, shifting from a niche concept into a practical tool increasingly adopted across the ferrous value chain.
Hedging improves financing conditions
The panelists emphasized that financial institutions are actively encouraging the use of hedging instruments such as futures and swaps. According to John Short, companies that hedge price exposure benefit from a lower credit risk, enabling them access to larger financing volumes at more competitive rates.
Structured trade finance gains momentum
A key development is the rise of structured trade finance solutions linked to derivatives. Tripartite agreements between borrowers, banks and clearing brokers or exchanges allow lenders to monitor and control hedging positions, improving transparency and security.
Philip Price noted that this model is already well established in commodities such as base metals and energy, and is now expanding into steel. Financing structures are also evolving beyond cargo-based lending toward inventory financing, including scrap, provided price risks are hedged.
Despite concerns, liquidity in steel derivatives markets is not seen as a major limitation, the panelists concurred. Significant volumes can be executed, particularly in over-the-counter markets, allowing companies to hedge large exposures such as long-term infrastructure and construction projects.
Dual role: risk management and price discovery
The panelists noted that derivatives are increasingly used not only for hedging but also for price discovery and market positioning. Compared to physical trading, derivatives offer capital efficiency, faster execution, and reduced operational risks, including logistics and counterparty issues.
The panelists highlighted that companies active in physical markets possess valuable real-time insights into supply-demand dynamics, while derivatives provide a mechanism to monetize this information without disrupting physical operations, enabling additional financial returns.
Scrap and carbon hedging gain importance
The growing role of scrap in electric arc furnace-based production is increasing interest in scrap derivatives, the panelists agreed, while, at the same time, the ability to hedge carbon costs alongside steel prices is becoming increasingly relevant, particularly under carbon pricing systems.
It was noted that, to support investment planning, the London Metal Exchange is extending steel contract maturities from 15 months to up to 36 months. The panelists said that this development allows companies to manage long-term price and carbon exposure more effectively, improving project financing conditions and cost visibility.