The London Metal Exchange (LME) has selected Argus as the settlement basis for its upcoming hot-rolled coil (HRC) contracts, it announced today.
Its HRC N.Europe contract will cash-settle against Argus' benchmark daily northwest European index. Its Steel Scrap CFR Taiwan contract will also settle against the Argus cfr Taiwan containerised 80:20 index.
Despite only launching in November 2018, Argus' NW EU HRC index is already the settlement basis for the CME N.EU contract, and has rapidly become a reference for the wider physical market.
Some participants have already started linking to the index for physical contracts, and larger mills are looking to use it in half-yearly deals with some big customers.
Indexing — whether against the outright monthly average or its change from one week or month/quarter to the next — reduces time spent negotiating base prices, and allows buyers to lock in more supply than might be possible at fixed prices.
The index selection comes after a period of extensive engagement by the LME with the physical market.
"It's really exciting to see the LME forging forward to list a contract — we are confident that the addition of direct market access through electronic trading platforms and liquidity provision will help drive this market to new highs in terms of liquidity," market-maker Pool founder Phillip Price said.
"This provides mills, stockists and distributors, service centres and consumers with an unrivalled opportunity to mitigate their exposure to risk," he said.
