Steel is one of the most widely used and largest physical commodity markets in the world. Global annual steel production is greater than annual global aluminum and copper production combined.
Originally made from iron, steel is the most recycled material in the world. Unlike any other recycled material, steel can be recycled repeatedly without any loss in quality. This makes iron ore and scrap steel vital components to steel production and the steel marketplace.
Steel is now widely used in sectors such as: construction, automotive transport, packaging, and appliances.
Types of Steel Futures Contracts
CME Group offers a variety of cash-settled Steel derivatives contracts all at different stages of liquidity and with slightly different use-cases, however, large commercial steel companies could potentially have a need to use a variety of steel futures contracts. This means there are some options to close out contracts without the physical delivery of steel.
Hot Rolled Coil
Hot Rolled Coil (HRC) is our most mature Steel futures contract. Hot Rolled Coil is a finished steel product such as sheet or strip which has been wound or coiled after rolling. It is created in a hot-rolling mill, where equipment on which solidified steel preheated to a high temperature is continuously rolled between two rotating cylinders.
Hot Rolled Coil is ultimately applied to a wide range of uses such as automobiles, electrical appliances, construction materials, containers, and steel pipes.
Busheling Steel Scrap
Busheling Steel Scrap (BUS) is CME Group’s second most mature Steel futures contract.
Busheling is clean steel scrap not exceeding 12 inches in any dimension. Most material are new factory sheet clippings, drops, stampings, etc., and only applies to new production scrap rather than scrap generated from obsolete used items. The material is to be free of metallic coatings (such as galvanization) and may not include old auto body and fender stock.
CME Group offers a variety of cash-settled Steel futures contracts to help steel market participants manage their risk or increase exposure to non-correlated assets. And since they are financially settled futures contracts, there is no risk of physical delivery.
Benefits of Trading Steel
By trading Steel futures contract at CME Group, you can enjoy benefits such as market transparency, increasing liquidity and the security of knowing every Steel futures contract is cleared through CME Clearing. Additionally, margin offsets are available between different Metals contracts. The contracts are available to trade Sunday through Friday, almost 24 hours per day. They can be traded through the Central Limit Order on CME Globex or through block trades on CME ClearPort.
Whether you are a steel manufacturer, recycler, or scrap steel processor, CME Group Steel futures have contracts to help manage the price risks that you face every day.
Test your knowledge
In case you didn’t know, the CFA Institute allows its members to self-determine and report continuing education credits earned from external sources. CFA Institute members are encouraged to self-document such credits in their online CE tracker. CME Institute offers a variety of courses, webinars, and white papers to support your professional education.