Bright steel future for Turkey
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Reuters
Oluşturulma Tarihi: Şubat 28, 2009 00:00
LONDON - The global downturn in the steel market highlights the need for steel futures as they could help the industry to hedge its risk when prices fall, the Chief Executive of the London Metal Exchange said.
"I think the fact that we're going through a downturn in the steel cycle is not hurting the contract," Martin Abbott said. "If anything, it probably is heightening the awareness of the contract."
Steel prices were booming when the LME launched its two billet contracts a year ago, leaving producers with little incentive to hedge because in a rising market they could always sell for a higher price. Since August, several physical traders have delivered material into the warehouse, bringing the total amount to over 50,000 tons. Falling prices have prompted participants to move material out of the warehouse, with major Turkish steel producer Çolakoğlu being among the latest to do so.
An exemption from the payment of value-added tax on securities linked to steel held in storage is expected to take effect soon in Turkey, paving the way for the full participation of Turkish mills, who are supportive of the contract.
"The impact (of Turkish mills' involvement) would be positive for the contract. There is an active Turkish steel billet industry," Abbott said.
The turnover on the contracts is picking up, but in favor of the Mediterranean contract, which accounts for 1.1 million tons of the 1.29 million total turnover in both contracts.
China will soon be joining the ranks of exchanges which offer steel futures contracts. The country's sole metals futures bourse, Shanghai Futures Exchange, will be trading steel wire and reinforced bar futures.
Steel prices were booming when the LME launched its two billet contracts a year ago, leaving producers with little incentive to hedge because in a rising market they could always sell for a higher price. Since August, several physical traders have delivered material into the warehouse, bringing the total amount to over 50,000 tons. Falling prices have prompted participants to move material out of the warehouse, with major Turkish steel producer Çolakoğlu being among the latest to do so.
An exemption from the payment of value-added tax on securities linked to steel held in storage is expected to take effect soon in Turkey, paving the way for the full participation of Turkish mills, who are supportive of the contract.
"The impact (of Turkish mills' involvement) would be positive for the contract. There is an active Turkish steel billet industry," Abbott said.
The turnover on the contracts is picking up, but in favor of the Mediterranean contract, which accounts for 1.1 million tons of the 1.29 million total turnover in both contracts.
China will soon be joining the ranks of exchanges which offer steel futures contracts. The country's sole metals futures bourse, Shanghai Futures Exchange, will be trading steel wire and reinforced bar futures.