PITTSBURGH The scrap futures market was markedly quiet this past week, mirroring the overall scrap market.
CME Group Inc.s U.S. Midwest No. 1 busheling ferrous scrap futures held steady, with no trades recorded.
So far in January, 1,140 tons have been swapped on the futures exchange (amm.com, Jan. 11
). Februarys bids are at $380 per gross ton, putting the contracts spread at $20 as offers stand at $400 per ton. The contract is settled based on AMM
s Midwest Ferrous Scrap Index for No. 1 busheling.
With the domestic scrap market on a steady pricing course since the end of October, interest in hedging the raw material hasnt been a priority, according to one industry source who closely follows the exchange.
When there is no volatility, people seem to think there is no reason to use it, but volumes should pick up when prices become more erratic. Once one side gets burned, people become proactive instead of reactive. It is like buying earthquake insurance after the fact, the source said.
With no sharp price moves apparent for Februarys deals, interest in the futures is expected to remain low for the time being.
But people are closely monitoring it, the source said, adding that most futures trading is done at the beginning and end of each month.
Scrap clusters into the early part of the month, when the deals are made and everything settles. It picks up again at the end of the month, and you see the same behavior in the futures market, according to the source.
Falling iron ore prices might be another factor motivating speculators to move to the sidelines, one futures trader said.
Iron ore is falling and it is unknown where it is headed, and could be causing the market to sit back and watch and wait, the futures trader said.