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CME to launch ferrous scrap futures

Jun 20, 2012 | 05:33 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."

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