The London Metal Exchange is expanding the range of its Mediterranean steel billet contract by introducing its first western European storage location in Rotterdam as of September 4.
European billet producers, traders and major scrap merchants have expressed some interest in using LME billet contracts for hedging, the port said. Business Manager for Steel Lotta Ulfsdotter said that the relatively high cost of transporting steel means that warehouse facilities that store breakbulk steel to back LME warrants need to be near market users. By approving Rotterdam as a storage location, "the LME is responding to demand from producers, consumers and traders in Western Europe for a local storage facility. This is a major step in the development of risk management practices in the regional steel industry."
Rotterdam is already a major warehousing center for the LME's non-ferrous contracts with 143 approved warehouses in the area.
Regional billet producers will be able to apply to have their billet brands registered for good delivery against the LME contract. So far, 40 producers have registered their billet brands with the LME as good delivery against the existing contract.
The London Metal Exchange is the world's premier base metals market. It offers futures and options contracts for aluminum, copper, tin, nickel, zinc, lead, aluminum alloy, steel billet, plastics and soon cobalt and molybdenum. Last year, revenue for the Exchange was $10.24 trillion. The Exchange currently has 5.13 million metric tons of metals on warrant in 516 warehouses across 38 locations globally, according to the LME.
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