Home | Business News | Browse by Publication | M | Metal Center News

Steel futures rollout draws another look: proponents of steel futures trading press on despite lackluster interest among steel producers and distributors.

Article Excerpt
[ILLUSTRATION OMITTED]

WITH THE LAUNCHING of steel futures trading already under way on the London Metal Exchange and in the Middle East as the New York Mercantile Exchange prepares to begin trading later this year, steel mills and service centers are taking a new look at this long-talked-about prospect and its potential effect on the way steel inventories and prices will be managed.

Top executives from steel mills operating in North America, including U.S. Steel, Nucor, AK Steel and Steel Dynamics, generally have said they are opposed to the concept of steel futures trading, favoring prices that are directly negotiated with customers rather than giving up pricing control to outside financial players. Industry leader ArcelorMittal has expressed open hostility toward the idea. But analysts who follow the sector note that these mills--as large as they are--still account for only a fraction of the global market.

"I know of several that are gearing up or are quietly supporting steel futures," says Steven Randall, managing director of Steel Business Briefing's London-based Steel Index, which compiles pricing data from more than 300 global steel industry participants. "But there are some opponents, no doubt. Resistance from a few mills isn't going to stop the launch of steel futures. The aluminum industry resisted for many years, and that's a much more concentrated sector."

Randall notes that five producers hold approximately 70 percent of the U.S. domestic market. Yet worldwide there are still more than 1,000 producers, and the top five command only a 20 percent market share. This globally fragmented industry and recent volatility in steel pricing make steel attractive to a growing group of futures exchanges.

The first exchange-based steel futures contracts for reinforcing bar were launched in October 2007 by the...

View this article FREE - Now for a Limited Time, try Goliath Business News
Free for 3 Days!