Futures trading market discussions in the industry

Futures trading market discussions in the industry

Latest developments show that steel industry is heading towards an international futures trading market, following the track of London Metal Exchange (LME) contracts, with the attempt of obtaining price transparency and avoiding volatility. Establishing such an international market via futures contracts requires great deal of analysis and consultations as the steel industry characteristics differ from the metals such as copper, aluminum and nickel that are currently being traded on the LME due to a wide variety of steel products that cannot be classified so easily. The lack of a benchmark commodity grade that is essential for this type of trading as the ingots that most other metals are using causes the conflict. On the other hand suggestions of taking hot rolled steel as a commodity benchmark do exist as an alternative. However, such an idea receives supports from major companies of steel industry that are willing to achieve certain stability. A gathering was held last week in London among the major European steelmakers in order to discuss the details of a proposed plan in this respect. LME would be able to decide within a year whether it would be applicable to carry out trading of steel in this way. A task force by the International Iron and Steel Institute (IISI) is formed to make investigations and study the case to create guidelines. His task force involves representatives of important steelmakers such as Arcelor, BHP Steel, Corus, Celsa, CST, Dofasco, Ispat International, Kawasaki and Nippon Steel. The industry spokespeople state that it would take LME another 12 to 18 months to start trading steel after concluding the feasibility studies, if the outcome is positive which can be interpreted that there is still a 2 years period before a major alteration in the way steel is traded.