The steel industry is in evolution. This mature and established industry is facing some of the sternest challenges in its history.
Markets for the two key steelmaking raw materials, iron ore and coking coal, have embraced fixed and index-linked spot pricing, with the annual iron ore benchmark having given way to monthly floating pricing. Similarly, the coking coal market now sees benchmark levels, formerly negotiated on an annual basis, fixed on a quarterly and even a monthly basis, with a number of market participants pushing for the use of floating prices.
Success in the steel market and in related markets in the future will call for the combined use of floating and fixed physical pricing mechanisms alongside price risk management tools.
To help steelmakers, traders and importers manage their price risk; FIS has developed the Virtual Steel Mill, a concept that encompasses risk management from producer to end user, combining cleared, cash-settled swaps and futures for iron ore, coking coal, scrap, freight and steel products, which can be traded on-screen with straight-through clearing.
The Virtual Steel Mill leverages FIS’ decade of experience helping clients maintain their competitive edge. For more information contact the company that leads the way in freight and commodity derivatives.