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Open interest on the TSI-based 62% Fe iron ore swap contract also hit an all-time high of 12.6 million tonnes on the Singapore Exchange (SGX) in November, while the TSI-based Turkish scrap contract cleared on LCH.Clea..

11 Dec 2012

AMSTERDAM(Commodity Online): North European steel swap contract saw the biggest trading month in 2012 in November. The TSI-based North European hot rolled coil (HRC) steel swap contract cleared on LCH and the Clearnet recorded its largest trading month this year. In different trades1,125 lots were cleared , totalling 22,500 tons of HRC.

“This contract saw open interest hit 3,475 lots at the end of the month. That is almost 70,000 tonnes of coil on an open position. Players in this market are starting to trade larger volumes as confidence builds and, as liquidity grows, a lot of new companies are setting up to trade this contract. 2013 could be a very promising year for this contract.” says Andrew Cullen, a broker at Freight Investor Services (FIS).

The European HRC market continues to be under pressure as a result of the on-going economic problems in the Eurozone, sapping demand levels. Almost 30 million tonnes of steelmaking capacity are currently idled throughout Western Europe. Nevertheless, recent market developments in Italy and a concerted global drive by steelmakers to raise price levels have dragged prices off 32-month lows.

GFI is also active in broking the North European HRC contract and SSY has recently added brokers to cover this market.

“People are looking to mitigate risk any way they can,” says Tim Hard, Director at TSI, “whether by running lean inventories, indexing, or hedging”.

“Recent price movements have reminded people that prices can go up, as well as down, likely leading to additional trading activity,” adds Vaseem Karbhari, TSI Steel Analyst.

The North European HRC contract is cleared by LCH.Clearnet (ticker SCN), with each lot representing 20 metric tonnes. The contract is cash-settled at the end of every calendar month, basis the average of TSI’s daily index prices.

Open interest on the TSI-based 62% Fe iron ore swap contract also hit an all-time high of 12.6 million tonnes on the Singapore Exchange (SGX) in November, while the TSI-based Turkish scrap contract cleared on LCH.Clearnet closed the month with 27,500 tonnes of open interest.


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