CME to launch coking coal swap futures contract on July 25

Thursday, 21 Jul 2011 |By Reuters

Reuters reported that the Chicago Mercantile Exchange will launch a coking coal swap futures contract on July 25th 2011 in an attempt to cash in on the increased interest in steel derivatives.

The contract is the latest in a series of steel related contract launches in recent months by the CME. Coking coal is a key steel making ingredient together with iron ore.

Mr James Oliver director of client development and sales at CME said that "At CME Group, we have created a virtual steel mill as we have launched contracts that can be used to hedge a steel mill's input and output. This set of contracts is our way to help the steel industry to manage risk."

The contract will be settled against Platts indexes and will list on the New York Mercantile Exchange and clear through CME ClearPort. The trading volumes for some of the previous steel contracts have not been as high as the CME expected.

Mr Oliver said that "Clearly we were hoping for more turnover, but we appreciate that it takes time to build a marketplace and we are confident that there is going to be an evolution in terms of volumes. Our most successful (ferrous) contract so far is the Mid US HRC contract. That contract trades every day and we are growing our open interest."

The coking coal contract unit will be 1000 tonnes. It will add to the CME's existing steel contracts such as the ferrous scrap cost and freight Turkey swap, US Midwest hot rolled steel and iron ore swaps and options. The CME also listed a steel billet, free on board Black Sea swap futures contract in April.