In February 2008 the LME launches futures trading in steel billets. Steel futures contracts will be traded on the LME like other metals futures, with an option for physical delivery using approved warehouses.
There are two steel billet futures contracts: Far East and Mediterranean; South Korea and Turkey. Both provide for either Russian or Chinese grade material, and for lot sizes of 65mts (+/-2%). The billet was identified as the material specified in the futures contract because it is the most commonly traded in the physical market. Traders may of course hedge other steel products or grades by reference to steel billet futures.
The launch of steel trading futures is timely. The global steel market is growing and prices are currently high and volatile. The new futures contract will offer the means of protecting against price volatility and consequently should encourage physical steel trading.
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