This article appears on today's Telegraph.co.uk site
If America and Japan are in recession, nobody told the steel market. The price of hot-rolled coil used in cars and trucks has risen 40pc since Christmas, reaching a record $1,003 a tonne last week. Billet steel used in buildings has doubled to $965 since the credit crunch began in August.
Steel has shrugged off a construction slump in the world's two biggest economies. It has ignored the housing slide in Canada, Britain, Ireland, Spain, France, Italy, New Zealand, and the Baltics. Hasn't the IMF slashed its forecast for world growth twice, added Europe to the sick list, and warned of a 25pc chance of a global recession? Steel laughs.
Blame the cost of ingredients. Brazil's Vale has just extracted a 65pc rise in iron ore prices for fiscal 2008 from producers - Posco, ThyssenKrupp, Nippon Steel and ArcelorMittal. Hence China's frantic efforts to stop BHP Billiton's $150bn hostile takeover of Rio Tinto, numbers two and three in the iron league. What may be consolidation to some, looks like a stitch-up to others.
Coking coal has tripled this year, if you can get it. The Baltic Dry Index measuring freight rates for metals, grains, and such, has vaulted 40pc since January, driven by iron ore demand. Blame also BRIC (Brazil, Russia, India, and China) demand.
We know the argument: China is gobbling up 35pc of world supply. (The US barely counts at 8pc). Fifty Chinese airports on the way; 9m vehicles produced in 2007, (up 23pc in a year); 5,000 miles of new railway lines - it adds up.
Russia's steel use jumped 25pc last year. It is launching a $1 trillion blitz to revamp Soviet infrastructure, starting with the St Petersburg ring road. The Gulf shore from Dubai to Kuwait is one long arc of construction cranes.
It is obvious what is wrong with this picture. Inflation is about to spoil the party in emerging markets. The headline rates are: Vietnam (21pc), Russia (14pc), Qatar (14pc), UAE (11pc), Saudi Arabia (8.7pc), China (8.3pc), India (7.3pc).
Note that the finance minister of Argentina (8.8pc) resigned in a huff on Friday after President Cristina Kirchner blocked his efforts to curb over-heating. The spreads on Argentine bonds popped 65 basis points as foreign investors turned tail.
Some countries have tried to put off the day of reckoning with price freezes, twisting their economies into knots. We have reached the point where the bloc will have to slam on the brakes, or let the genie out of the bottle.
Whether the price of steel goes up or down, the City aims to profit.
The London Metal Exchange is today launching a futures contract for billet steel, the semi-finished fungible variety. The first batch of July-dated lots of 65 tonnes each - the size of a Russian-Ukrainian rail car, the industry norm - will be sold by open outcry this morning at 11.40.
For raw theatre, it is hard to beat the shrieking finale of a price bid at the LME. The traders perch inside a ring of red leather seats. The barter escalates from desultory grunts and hand-signals to a fever-pitch of barking as each five-minute session comes to a crescendo.
The last scream before the bell sets the benchmark price for copper, nickel, aluminium, zinc, tin, and lead, respectively, across the world.
This splendid relic of Elizabethan commerce may seem quaint, but it cornered 95pc of all non-ferrous metals traded across the globe last year, with a turnover of $9.5 trillion.
"They don't have many O' levels between them in the Ring, but the LME still reigns supreme," said Nigel Farage, MEP, a metal man before he founded the UK Independence Party.
"The beauty of open outcry is that nobody can fix the price. It all takes place in the full glare of the world, and you avoid those dramatic gaps you get in electronic trading when nothing moves. Screaming is more orderly than it looks," he said.
The steel contract is a big play, second to oil in the raw materials firmament. World steel output hit a record $660bn last year. If the venture succeeds - Dubai and New York's Nymex are angling for a share - it may double the LME's turnover in five years.
Steel futures are a boon to the world's army of small producers. They can at last sell their product into the forward market, hedging risk.
It eliminates the punitive "haircut" imposed by banks to cover wild price moves. The cost of credit will fall. "This is the first time they have been able to manage their risk and guarantee cash flow," said Liz Milan, the LME's commercial director. This is creative City capitalism at its best.
The steel lords sniff a threat. Hedge funds will run amok, they mutter. Look what they did to nickel contracts last year - pushing prices up and down like a yo-yo.
"We do not believe financial institutions speculating on steel pricing will bring any benefit to our industry," said Arcelor-Mittal, top dog with 10pc of world steel.
Take that with a pinch of salt, says Perine Faye of BaseMetals.com. "They're afraid of losing their pricing power. They've had new records every day and high margins, so why let speculators threaten that," she said.
The big guns may change their mind if prices fall. Futures contracts can be a lifeline in a bear market, as the LME knows.
Which makes you wonder: is this billet contract the bell that rings a market top for steel?