CME Group to Launch Ferrous Scrap Futures

Chicago-based CME Group has announced plans to launch the first ferrous scrap futures contract in the United States. According to CME, starting Sept. 10, 2012, subject to regulatory approvals, it will begin trading futures for U.S. Midwest No. 1 busheling ferrous scrap. The CME says the contract will be listed by and subject to the rules of New York Mercantile Exchange (NYMEX).

“Today, the global steel industry relies on the U.S. to supply more than 20 percent of its ferrous scrap needs, making it the biggest exporter of this important raw material to the industry,” says Harriet Hunnable, CME Group managing director, metals products. “Continued demand for U.S. scrap and increased price volatility in ferrous products underscore the need for an effective tool to enable price risk management throughout the entire supply chain, from raw materials to finished steel products. In addition to being an efficient risk management tool for regional industry participants, we firmly believe our U.S. Midwest scrap futures contract has the potential to become a global benchmark for price discovery and managing volatile input prices.”

The introduction of U.S. Midwest scrap futures extends CME Group’s suite of ferrous products in the United States beyond its current contracts for U.S. Midwest domestic hot-rolled coil steel futures and options.

In supporting the introduction of a scrap steel futures contract, CME says currently more than 60 percent of the steel produced in the U.S. is based on ferrous scrap. CME adds that the new futures contract adds to the firm’s metals derivatives products designed to help customers manage price volatility across the steel value chain through its Virtual Steel Mill.

The contract will be financially settled against the American Metal Market’s (AMM's) new U.S. Midwest Ferrous Scrap Index and will be available for trading on CME Globex and for submission for clearing through CME ClearPort beginning with the October 2012 contract month.

The contract is the first CME Group product based on AMM’s price assessment services following a June agreement between the two companies to develop risk management products for the steel industry based on market data from AMM.

More information on CME Group’s suite of ferrous metals risk management products is available at www.cmegroup.com/ferrous.