Tuesday, August 11, 2009

European Billet & Rebar Markets Scrutinised


The Steel Index (TSI) has begun weekly publication of the ‘spread’ between its transaction-based rebar prices for Northern and Southern Europe and the London Metal Exchange’s (LME) Mediterranean billet cash settlement prices. In addition to the Rebar/Billet price spreads, the weekly average of the LME billet settlement prices are published alongside the TSI price histories for rebar in the European regions. 

“This data is key for companies in the European region who deal with rebar. As billet is the feedstock for rebar products, the spread between billet prices and rebar prices is an essential data point,” says Tim Hard, manager of The Steel Index. “The spread reflects the differing supply and demand dynamics of rebar and billet and may one day foster the development of an Over-The-Counter swaps market, offering companies the opportunity to hedge by trading these spreads.” 

Transaction prices from Monday through Sunday are reported to The Steel Index by mills, traders, service centres and consumers of rebar. From this data set, a volume-weighted average price is produced and is matched to the mean of the same week’s LME Mediterranean Billet contract’s daily settlement. 

Lotta Ulfsdotter, the LME’s Steel Business Manager noted “Rising steel price volatility and continued uncertainty about future movements mean that anyone involved with long steel products is increasingly looking for tools to manage price risks. We welcome any mechanism that helps market participants become more informed and make better decisions.”

The Steel Index’s transaction-based prices show that the last 12 months have seen ex-works rebar prices in Northern Europe drop from a July 2008 high of €876/tonne to a July 2009 low of €302/tonne, while Southern European prices fell from €844/tonne to €318/tonne. The Steel Index reported today that prices for the first week of August had remained above these lows.


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