The Steel Index (TSI) will increase the publication frequency of its ferrous scrap reference price for Turkish imports of HMS #1&2 80:20 from weekly to daily from 1 September 2011. Turkish scrap import prices are seen as one of the key indicators not only of scrap pricing, but also of steel pricing around the world.
This responds to industry demand for more frequent scrap price information, as mills, traders and steel customers address the challenges of volatile pricing throughout today’s steel markets.
"The Turkish scrap market is a fast moving one, where offers and transactions can slacken and firm up from day-to-day. A number of physical market participants, both mills and brokers, have asked us to increase the frequency of publication, which we are delighted to be able to provide," says Tim Hard, Director of Steel and Scrap at TSI.
On 6 April 2011, LCH.Clearnet made history having processed the world’s first cleared scrap swap transaction basis TSI’s Turkish imports price. Since then there has been interest on both sides of the curve, with eagerness exhibited by many scrap players to manage the price risk for this key raw material input cost. Scrap makes up the majority of production costs for electric-arc-furnace based steel production: which is by far the largest production route in Turkey.
TSI’s scrap index is expected to fulfil a similar role to their iron ore index which has already been adopted worldwide as the industry benchmark for iron ore spot prices. Employed by mining, trading and steel companies, TSI’s iron ore index is behind a wide range of physical pricing arrangements and is the settlement basis for over 95% of all cleared iron ore derivatives and futures. TSI’s daily HRC steel prices for Northern and Southern Europe are also attracting cleared trades and physical indexing.
"The introduction of a daily reference pricing mechanism on the TSI Turkish scrap is a valuable compliment to the daily TSI iron ore and daily European HRC indices. In order to capture the intra week volatility of the scrap market, a daily price is an absolute necessity. Improved price transparency will increase industry confidence in this growing derivatives market", says Sam Mehew, Derivatives Broker, FIS.
A cleared scrap swap contract for Turkish imports, basis TSI, is available on LCH.Clearnet. From September 2011 onwards, the settlement values for these monthly scrap contracts will be calculated as the average of TSI’s daily prices published in the expiring month (rather than the average of TSI’s weekly prices published in the expiring month as have been used to-date).