LME chooses Argus as settlement basis for NW EU HRC

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.

By Colin Richardson