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First scrap futures trade completed

Sep 11, 2012 | 02:32 PM |

Tags  ferrous scrap, CME Group, scrap futures, Kataman Metals, FIS, Macquarie Bank

NEW YORK — CME Group Inc.’s new ferrous scrap futures contract has recorded its first trade representing 20 gross tons.

The deal, made on the contract’s launch day Monday, was brokered by Freight Investor Services Ltd. (FIS), with Macquarie Bank acting as a general clearing member, according to London-based FIS.

St. Louis-based steel and nonferrous metals merchant Kataman Metals LLC was one of the counterparties to the contract’s inaugural trade, FIS said.

"Kataman Metals is very excited about this new ferrous scrap contract. The complement with the existing HRC (hot-rolled coil) contract should help both contracts grow in liquidity," Brad Clark, Kataman’s director of steel and scrap trading, said in a statement released by FIS. "The need for price risk management tools in this extremely volatile ferrous scrap market makes this contract a welcome addition to those looking to hedge their risk."

Monday’s trade was for a November 2012 futures contract and was priced at $330 per ton, according to data on CME’s website.

The new scrap futures contract is listed on the Nymex and financially settled against AMM’s Midwest Ferrous Scrap Index for No. 1 busheling (, Aug. 17). AMM’s index, launched in June, is calculated each month based on tonnage-weighted and normalized transaction data.

While only one trade was completed on the first day, FIS senior steel swaps broker Sam Mehew said his company has experienced a "large amount of interest" in the new contract.

"The U.S. scrap market peaked at $520 per ton in January and has fallen to $391 per ton today, a 25-percent drop. This demonstrates the importance of market participants hedging their risk in this volatile environment. Combined with our existing U.S. HRC and Turkish scrap contracts, producers now have the ability to manage this price risk both domestically and on an international level," he said.

CME managing director of metals products Harriet Hunnable said the exchange was pleased with news of the inaugural trade on the contract’s first day.

“This is indicative of customer demand for risk management tools in this space, and we firmly believe our scrap futures contract has the potential to become a global benchmark for price discovery and managing volatile input prices," she said.

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