LONDON, Oct 31 (Reuters) - Startup steel trading firm Mettalex is in talks with exchanges about launching a new scrap contract focused on Asia, the firm’s head said on Wednesday.
Growing trade in steel scrap delivered in containers is ripe for a derivative, said Phillip Price, managing director of Mettalex which has its official launch on Friday.
“We are big believers in the idea of a containerised scrap derivative product for south or east Asia. We’ve been developing systems in order to create a forward curve for that product,” Price told Reuters in an interview during LME Week.
“We’re in talks with several exchanges at the moment. There are a couple of exchanges that are interested in it,”
Price, who is vice chairman of the London Metal Exchange Steel Committee, declined to identify the exchanges.
The LME scrap futures contract is based on bulk consignments into Turkey, but there has been growing trade in scrap delivered in containers and this activity now accounts for between 30% and 40% of global volumes, Price said.
“The volumes are smaller and there’s a large community of very active trader participants, so it’s ideal in our view for a derivative product,” he said.
Price said his new privately-held firm Mettalex will carry on some of the activities of his former firm Ferrometrics in providing liquidity for steel contracts on the LME, the CME Group and Nasdaq Inc.
“Initially we’re focusing on creating the curve structures on the products we’re involved with. In the second phase, we have additional funding pledged to deploy more systematic trading strategies,” he said.
“Our approach is very much suited to markets in which there is a vacuum in terms of forward pricing.”
Another company is due to be launched in the next few months focusing on research in the steel sector, The Board Report, he added.
Price also founded a new initiative called Pool, an umbrella organisation aimed at boosting financial trading in steel, partly by bringing in new participants.
“To get to the next phase we need to bring more people along and so we’re trying provide services and support,” Price said. (Reporting by Eric Onstad Editing by David Holmes)