By Paul Ploumis 02 Sep 2015 Last updated at 02:51:43 GMT
EDGWARE (Scrap Monster): The London Metal Exchange (LME) has decided to introduce scrap and rebar cash settled contracts in November. The two contracts- LME steel Rebar and LME Steel Scrap is designed to complement the existing LME Steel Billet contract and is scheduled to be launched on November 23rd.
According to Robert Fig, LME’s Head of Physical Market Sales, the lot sizes of both the products will be kept at 10 metric tonnes, so as to attract participation by maximum number of producers and consumers. The scrap contracts will be primarily focused on 80:20 heavy melting scrap.
Also, the geographical area of interest for the new contracts will be largely Europe, he added. Scrap from across the world reaches the Black Sea region, where they are transformed into billets and rebars before being exported. He further stated that the small lot sizes are likely to make the contracts more inclusive.
The billet contract introduced by the LME in 2008 had turned out to be unsuccessful, mainly because it was introduced as a global product. The proposed rebar contract is expected to attract huge interest from producers and users belonging to construction market.
The addition of these two new contracts will expand the LME’s range of products. Further, it will help participants to transparently price their metal offers.
The London Metal Exchange (LME) is the futures exchange with the world's largest market in options and futures contracts on base and other metals. As the LME offers contracts with daily expiry dates of up to three months from trade date, weekly contracts to six months, and monthly contracts up to 123 months, it also allows for cash trading. It offers hedging, worldwide reference pricing, and the option of physical delivery to settle contracts.