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With the rapid development of ferro-alloys futures trading, Chinese steelmakers are increasingly using the newly-introduced futures-spot basis pricing pattern to hedge risk, according to Hao Zhu, assistant director of futures and risk management at Nanjing Iron & Steel.
Zhu said steelmakers can sign long-term contracts with ferro-alloys producers on a futures-spot basis, making it a flexible move for both sides to enable stable prices and secure supplies.
Steelmakers in China tend to purchase raw materials through long-term contracts with ferro-alloys producers based on monthly tender prices, Zhu said. But Nanjing Steel, a private steelmaker based in Jiangsu province, in east China, was now running a pilot program using the pricing pattern in its raw materials procurement process, he added.
In addition to silicon-manganese and ferro-silicon futures contracts being traded on the Zhengzhou Commodity Exchange, a ferro-chrome futures contract was in the research stage at Shanghai Futures Exchange, one delegate said.
“But the launching of a ferro-chrome futures contract will be slow, with several other contracts on the top of the waiting list at the Shanghai Futures Exchange,” the delegate added. fastmarkets
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