PITTSBURGH The scrap futures market last month showed its strongest performance since its launch as bearish sentiment and increased interest from new speculators brought new contracts.
CME Group Inc.s U.S. Midwest No. 1 busheling ferrous scrap futures contracts totaled 5,340 gross tons in January, putting the total since its September debut at 15,460 tons.
Januarys volume was 20 percent higher than the contracts previous record of 4,440 tons in October.
February and March bids have retreated to $380 per gross ton from $390 (amm.com, Jan. 28), and offers stand at $395 per ton. The contract is settled based on AMMs Midwest Ferrous Scrap Index for No. 1 busheling.
A new entrant to the market said he decided to actively hedge as he is bearish on the direction of scrap prices. "I was covering busheling tons to lock in margins," the recycler said.
While the number of active contracts is still modest, commercial interest is growing. "A number of companies have signed up but have not traded," André Marshall, chief executive officer of Houston-based Crunch Risk LLC, told AMM. "Key people in the industry have organized their accounts. It will take a while, but this contract will develop."
Marshall said that skeptics have already been proven wrong as to how far out hedgers are willing to go. "Some contracts have been brokered through August, yet people were saying that no one would be crazy enough to go out that far," Marshall said. "But some are recognizing that taking a position out this far can help them to lock in the margin of their scrap."