On July 24, the London Metal Exchange (LME) announced the expansion of the range of its Mediterranean steel billet contract by introducing its first Western European storage location for the contract in Rotterdam, effective as of September 4, 2009. Rotterdam is already a major warehousing centre for the LME's non-ferrous contracts with 143 approved warehouses in the locality.
As per an LME statement, the LME board this week approved the decision to list Rotterdam as a location for its Mediterranean steel billet contract at a time when steel market participants in the region, such as European billet producers, traders and major scrap merchants, particularly in Germany and neighboring countries, are expressing interest in using the LME billet contract for hedging purposes. According to the LME, this move will benefit Western European billet producers, traders and major scrap merchants looking to hedge.
Commenting on the introduction of the Rotterdam storage location, LME business manager Lotta Ulfsdotter said, "Because of the relatively high cost of transportation of steel, warehouse facilities which support the warrants need to be near market users and the LME is responding to demand from producers, consumers and traders in Western Europe for a local storage facility. This is a major step in the development of risk management practices in the regional steel industry."
Following the approval of Rotterdam as a recognized storage location, the LME will invite individual warehouse companies to register specific sites
In addition, regional billet producers will appreciate the benefits of applying to have their billet brands registered for good delivery against the LME contract, said the LME.
So far, 40 producers have registered their billet brands with the LME as good delivery against the existing contract.