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CME to launch ferrous scrap futures

Jun 20, 2012 | 04:33 PM |

Tags  CME, scrap futures, ferrous scrap index, Harriet Hunnable, Chris Prentice


NEW YORK — CME Group Inc. plans to introduce a new ferrous scrap futures product this fall utilizing AMM’s Midwest Ferrous Scrap Index, launched earlier this month.

"As ferrous scrap became a global commodity, the global scrap price has become one of the most volatile raw materials for steelmakers," CME managing director of metals products Harriet Hunnable said Wednesday at the Steel Success Strategies XXVII conference in New York.

"Price correlations between scrap, iron ore and steel are no longer high enough to manage price risk in scrap," she said. "Volatility will be a major issue for this market."

CME has entered into a licensing agreement with AMM to utilize the new index as the basis of its exchange-traded ferrous scrap product, Hunnable said. AMM’s Midwest Ferrous Scrap Index, launched June 11, lists monthly index prices for three grades: No. 1 heavy melting scrap, No. 1 busheling scrap and shredded steel scrap.

"AMM has already announced the listing of their new index. We believe this index is very robust and that AMM has very good market engagement with the industry and is the right partner for us," Hunnable said.

"Scrap is one of the first pricing indicators for the U.S. steel industry," she added. "For producers, steel scrap can make up between 45 percent and 85 percent of raw material cost. Being able to better manage this cost would really help them manage their risk."




Latest Pricing Trends Year Over Year

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After witnessing the pace of steel plant idlings and worker layoffs during the first half of the year, what is your view of the second half of 2015? (choose one)

No matter what else happens, layoffs and shutdowns, etc., have nearly or essentially stopped for the year.
The environment will change little and the pace of layoffs will continue at a similar rate as the first half of 2015.
The environment will change little yet the pace of layoffs will begin to slow slightly to moderately.
The environment will change little yet the pace of layoffs could exceed the rate seen thus far.
The environment will improve slightly to moderately yet hiring and plant restarts will not resume this year.
The environment will improve slightly to moderately, with hiring and plant restarts commencing.
The environment will improve dramatically yet hiring and plant restarts will still be negligible in comparison.
The environment will improve dramatically yet hiring and plant restarts will only be slight to moderate.
The environment will improve dramatically, with hiring and plant restarts occurring nearly in tandem.


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