Products and Trading
In April 2008 the London Metal Exchange (LME) launched two regional and physically-deliverable steel billet futures contracts. The two regional steel contracts are the first part of a long-term plan by the LME to bring the benefits of price risk management and transparency to the steel industry.

Volatility in the Steel Market
Volatility has led consumers to look for other ways to mitigate their price risk, including the establishment of variable cost contracts, surcharge mechanisms and over the counter derivative (OTC)products. These options also bring with them a new set of issues and risks. There are many in the steel industry that now see the need to manage their price risk and cash flows more effectively and hedging allows them to do just that.

The Benefits of Hedging
The Steel Industry can benefit from managing price risk to achieve a variety of outcomes:

• Protection against adverse price movements
• Offer long-term fixed price sales and the ability to lock in a margin
• Improve budget forecasts of costs and profits
• Turn stock into cash or security for finance purposes

Try the LME's Steel Hedging Simulator

Why Sucden Financial?
Sucden Financial is one of only 12 floor or Ring Dealing members of the LME (its highest category of  membership). Executing a significant proportion of the market’s activity, Sucden Financial also has one of the largest floor teams.

• Direct access to Ring trading
• Direct access to Ring commentaries
• Real-time access to spreads and spread quotes

Expertise
Sucden Financial’s Industrial Commodities Desk services trade customers globally. The team have the experience and specialist skills to provide a quality service for a wide variety of clients.

The team’s skill base includes:
• Technical analysis.
• Physical commodity trading.
• Average based products.
• Option pricing, modelling and risk management.
• Exotic derivatives and structures.
• Development and suggestions of hedge strategies and selection of appropriate products.
• Foreign language servicing.

 
Industrial Commodities
Plantation Place South
60 Great Tower Street
London EC3R 5AZ
Tel: +44 (0) 20 3207 5430
Fax: +44 (0) 20 3207 5459
Email: industrials@sucfin.com
Web: www.sucdenfinancial.co.uk/industrials

How are the contracts traded?
As with all other LME contracts, only members of the Exchange will be able to trade and only Ring Dealing Members (which include Sucden Financial) have the exclusive right to trade in the Ring. The contracts are also available to trade inter-office 24 hours a day and clients have the opportunity to trade the contracts electronically, via Sucden Financial’s STAR trading platform.

Two regional contracts
The Exchange currently has contracts for the Far East and the Mediterranean Regions. Each has different chemical and physical specifications that have been developed to meet the price management needs of the Steel industry in that region.

Most of the trade in billets is intra-country and the two contracts reflect the different regional trade flows and pricing approaches. The LME has stated that this is just the start and after a successful launch, further regional contracts will be launched.

Physical Specifications
Each regional contract has individually defined physical specifications that include quality,
shape and length, lot size and delivery location.You may check the specifications for each
region at www.lme.com/steel

Trading Specifications
Each regional contract is traded in an identical manner on the exchange.

Please find the full LME Steel Billet Trading Specifications on the LME's website.