LME opens steel futures trading this week

Early interest only marginal in billet trades

By Tom Stundza -- Purchasing, 2/27/2008 11:43:00 AM

The London Metal Exchange (LME) launched two steel futures contracts this week covering steel billet for delivery in the Mediterranean and Far East. Initial trading is on the LME’s electronic platform, known as Select, and by telephone. Open-outcry trading for the futures contracts will start on April 28. The first cash date is July 28, 2008, with contracts out to 15 months. Lot size will be 65 tons. The initial delivery location for the Mediterranean contract will be Istanbul and Dubai, and for the Far East contract will be South Korea and Malaysia.

There has been strong opposition to steel futures trading from some major steelmakers, including ArcelorMittal, the world’s largest producer. However, a leading U.S. commodities trader, Cargill of Minneapolis, is considering participation in the LME steel futures exchange, according to Bob Mann, vice-president of business development at Cargill Ferrous International, speaking to a Reuters News Service reporter.

Still, the steel billet trading program can’te considered a success, according to subscription news service Platts Steel Markets Daily, which is reporting fading interest on Tuesday (with 12 lots worth $600,000 of business transacted) after what is described as a decent start on Monday (when 35 lots worth $1.7 million of business were transacted).