Shredded steel scrap futures trading on NASDAQ

Shredded steel scrap futures trading on the NASDAQ Futures Exchange (NFX)

From:  Peter F. Marcus, founder of World Streel Dynamics (WSD) and World Steel Exchange Marketing (WSEM)
November 10, 2016

NASDAQ FUTURES EXCHANGE (NFX) SEEKS TOP SPOT IN U.S. SHREDDED STEEL SCRAP FUTURES TRADING

The NASDAQ, which is the world’s premier financial exchange technology provider, plans to launch Midwest U.S. Shredded Steel Scrap TSI Index futures on its new U.S.-based NFX futures exchange.  Its futures trading platform “went live” in July 2015 for listed futures and options for oil, natural gas and US power benchmarks.  All products are cleared through The Options Clearing Corporation (OCC).  The shredded scrap futures will be the cornerstone for a suite of NFX ferrous products.

The NFX is open for trading 22 hours a day from 7:00 PM Sunday (NY time) through Friday at 5:00 PM (NY time).   Its 17 original and committed clearing members include the largest commodity brokers and energy traders in the United States.  Six independent software vendors (ISVs) will provide access to the trading platform.  At least three market makers will be making prices for the steel scrap contract on Day One.  World Steel Dynamics, World Steel Exchange Marketing and NASDAQ will market the NFX steel products.

WSD and WSEM expect exponential growth for U.S. shredded steel scrap futures.  A highly positive indicator for the NFX’s ferrous futures trading activity is the magnitude of rebar futures trading on the Shanghai Futures Exchange and iron ore trading on northeast China’s Dalian Commodity Exchange.  Chinese rebar futures trading volume amounts to about 30X the country’s 200 million tonnes of annual rebar production, while iron ore futures trading volume is at about a 20X multiple to China’s 1.1 billion tonnes of iron ore consumption.  NFX shredded futures will provide an effective price-risk management tool for: a) 50-60 million tonnes of annual US scrap consumption; b) 90+ million tonnes of annual global scrap trading; and c) 200+ million tonnes of non-Chinese steel product output each year whose price is impacted by changes in the steel scrap price.

Rising Chinese steel scrap exports in the years ahead will stimulate steel scrap futures trading.  The country’s obsolete scrap recovery, based on the analysis in WSD’s Global Metallics Balances system, rises from about 80 million tonnes per annum at present to about 200 million tonnes in 2025; and, then, to about 400 million tonnes in 2035.

Shredded steel scrap futures should ramp up far faster than has been the case for U.S. hot-rolled coil futures, which have been listed since 2009, because: a) the USA hot-rolled coil is not a global product (as is shredded scrap); and b) the USA steel mills, who are the only potential sizable sellers of HRC, have not supported it.  In comparison, all steel scrap processors are both buyers and sellers, which means that the potential number of sellers is huge. The shredded contract’s relatively small size – 20 gross tons – makes it accessible to thousands of scrap buyers and sellers the world over.

NASDAQ (NASDAQ: NDAQ) is a leading provider of trading, clearing, exchange technology, listing, information and public company services across six continents. Through its diverse portfolio of solutions, NASDAQ enables customers to plan, optimize and execute their business vision with confidence, using proven technologies that provide transparency and insight for navigating today's global capital markets. As the creator of the world's first electronic stock market, its technology powers more than 70 marketplaces in 50 countries, and 1 in 10 of the world's securities transactions. NASDAQ is home to 3,700 listed companies with a market value of $9.3 trillion and over 17,000 corporate clients. To learn more, visit: NASDAQ.com/ambition or business.NASDAQ.com.

This report includes “forward-looking” statements that are based on current expectations about future events and are subject to uncertainties and factors relating to operations and the business environment, all of which are difficult to predict.  Although we believe that the expectations reflected in our forward-looking statements are reasonable, they can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties, including among other things, changes in prices, shifts in demand, variations in supply, international currency movements, technological developments, governmental actions and/or other factors. The information contained in this report is based upon or derived from sources that are believed to be reliable; however, no representation is made that such information is accurate or complete in all material respects, and reliance upon such information as the basis for taking any action is neither authorized nor warranted.  Neither WSD nor WSEM solicit, and avoids receiving, non-public material information from its clients and contacts in the course of its business.  The information that we publish in our reports and communicate to our clients is not based on material non-public information. The officers, directors, employees or stockholders of World Steel Dynamics Inc. or World Steel Exchange Marketing do not directly or indirectly hold securities of, or that are related to, one or more of the companies that are referred to herein.  World Steel Dynamics Inc. may act as a consultant to one or more of the companies mentioned in this report.