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USD1bn of LME steel billet futures traded since launch last year

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The London Metal Exchange says USD1bn in steel billet has been traded on the exchange by industry since the contract was introduced in February 2008. 

This equates to more than 2.2 million tonnes of steel billet in physical material.
The USD1bn milestone was achieved in the afternoon of Wednesday 19 August, and follows strong trading activity in July with over 3,500 contracts traded, equivalent to 229,000 tonnes of steel – a record month for LME steel billet this year.
August is also on track to be another strong month with 2,413 contracts and 156,845 tonnes of steel billet already traded during the first half of the month.
Lotta Ulfsdotter, business manager for steel at the LME, says: ‘Reaching this milestone demonstrates the solid foundations that the billet contract has established within the steel industry, and we are increasingly seeing the LME price referenced in the market for scrap and reinforced bar. We continue to work on developing the contract for this important market, including the expansion of our storage locations to Western Europe, announced last month’.
The LME announced last month that it is expanding the range of its Mediterranean steel billet contract by introducing its first Western European storage location for the contract in Rotterdam, with effect from 4 September 2009.
Other key developments since the steel contract was launched include: the European ferrous scrap industry is increasingly pricing scrap at a discount to the LME price for physical supply contracts; construction firms are able to use the LME steel price as the reference point for rebar, as well as hedging rebar price exposure; 100,000 tonnes of steel billet has been delivered in to LME approved warehouses since launch, with over 60,000 tonnes of steel billet delivered out – equating to 60 per cent turnover in stock; and members are reporting that additional, non-cleared, OTC volumes based on the LME contract spec are exceeding by a factor of four times those trading across the exchange platforms.

Raymond Key, global head of metals trading at Deutsche Bank, an LME member trading LME Mediterranean steel billet, says: "The LME Mediterranean steel billet contract is integral to the development of risk management for the steel industry. It is from these nascent beginnings that steel risk management will rapidly expand. Having a physically deliverable steel contract has allowed DB to engage in financial and physical business with its clients that would not be feasible without such a contract."

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