NEW YORK CME Group Inc. will launch on Sept. 10 its first-ever U.S. ferrous scrap futures contract, which will be based on AMMs Midwest Ferrous Scrap Index for No. 1 busheling, the exchange announced Friday.
The new contract, which will be listed on the Nymex, will be financially settled against AMMs new index, which was launched June 11 based on tonnage-weighted transaction data (amm.com, June 11).
The CMEs new contract is intended to provide steelmakers and other market participants in the domestic market and around the world a way to mitigate their pricing risk for raw materials, the Chicago-based exchange said in a statement.
"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," CME managing director of metals products Harriet Hunnable 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," she added.
The new contract, which is still subject to regulatory approvals, is expected to be available for trading on CME Globex and for submission for clearing through CME ClearPort beginning with the October 2012 contract month, CME said.
In June, CME announced it had entered into a licensing agreement with AMM to utilize the new index as the basis for its exchange-traded scrap product (amm.com, June 20).