PITTSBURGH A sharp spike
in physical ferrous scrap prices this month has sparked renewed
interest in the ferrous scrap futures market as investors came
off the sidelines in the nick of time to capitalize on the
CME Group Inc.s U.S.
Midwest No. 1 busheling futures saw 199 lots representing 3,980
gross tons swapped in the first 12 days in March alone, after
50 lots representing 1,000 tons were swapped in February, CME
The CMEs futures contract
is settled based on
AMMs Midwest Ferrous Scrap Index for No. 1
busheling. In March, the Index settled at $417.26 per ton,
up 11.2 percent from Februarys $375.24 per ton (
amm.com, March 11).
AMM publishes the Index
on the 10th of each month, unless that falls on a weekend or
public holiday, in which case it is published the following
working day. The Index was published this month on March
However, some physical trading
had taken place in the days before March 11, giving market
players some indication of where the CMEs futures
contract might settle, sources said.
"The index doesnt settle
until the eleventh. It became apparent on the sixth that
(physical) scrap deals were being done up $40 to $45 a ton.
When that information of these higher deals flowed, that was
the catalyst that sparked people to trade," an active metals
futures source said. "So basically everyone knew on the sixth
that prices were headed up and bought (positions on the CME
contract) before the Index was officially settled."
But activity for the remainder
of the month could be quieter due to timing, the source
"The majority of trades happen
at the beginning of the month when prices become obvious. They
dont trade throughout the month because although there is
talk about where the market will go, often it can just be smoke
and mirrors," the source added.
The hope of taking advantage of
the same circumstances in April arent very likely,
according to a second futures trader, sensing that the scrap
market has peaked. "Ferrous scrap appears to already be edging
off its peak. Most ferrous prices, including iron ore, seem to
be breaking down and the balance going forward appears to have
a downside," he said.
The April futures contract
settled at $404 per ton March 13. Positions have been taken out
as far as October at $406 per ton.