CME launches first US ferrous scrap futures contract

Sep 30, 2012 | 07:00 PM | AMM staff

Tags  CME Group, Nymex, CME Globex, CME ClearPort, U.S. ferrous scrap futures, Harriet Hunnable, No. 1 heavy melting scrap, No. 1 busheling AMM Staff

Facing wildly fluctuating scrap prices, the need to manage price risk is no more evident than in the United States, the world’s largest exporter of the key raw material. To that end, CME Group Inc. on Sept. 10 launched its first-ever U.S. ferrous scrap futures contract. The new contract, listed on the New York Mercantile Exchange (Nymex), will be financially settled against AMM’s Midwest Ferrous Scrap Index for No. 1 busheling, which was launched in June based on tonnage-weighted transaction data.

The CME’s new contract, available for trading on CME Globex and for submission for clearing through CME ClearPort beginning with the October 2012 contract month, is intended to provide steelmakers and other market participants in the United States and around the world a way to mitigate their pricing risk for raw materials, according to the Chicago-based exchange.

“Today, the global steel industry relies on the U.S. to supply more than 20 percent of its ferrous scrap needs, making it the biggest exporter of this important raw material to the industry,” Harriet Hunnable, CME managing director of metal products, said in a statement. “Continued demand for U.S. scrap and increased price volatility in ferrous products underscore the need for an effective tool to enable price risk management throughout the entire supply chain, from raw materials to finished steel products. In addition to being an efficient risk-management tool for regional industry participants, we firmly believe our U.S. Midwest scrap futures contract has the potential to become a global benchmark for price discovery and managing volatile input prices.”....