Steel futures began open outcry trading on the floor of the London Metal Exchange (LME) on Monday, taking the conservative US$800-billion industry into what many traders hope will be a new era.
Trading in steel billets started almost as soon as LME commercial director Liz Milan rang the bell to start the session on Europe's last open outcry trading floor.
The Mediterranean steel contract saw trades at US$995 and US$1,005 a tonne and was last at US$990/1,000, while the Far East contract was last traded at US$995.
"It is a big day," said Martin Abbott, the chief executive of the LME.
Latest Reuters data showed total matched trade on the ring on the Mediterrenean contract reached 18 lots and on the Far East contract 4 lots.
The first trades took place between AMT and Natexis.
Other ring dealers including Barclays, Metdist and Sucden also took part in the trading.
"It was a good start," an LME trader on the floor said. "Everyone was involved and we've got people with positions now, which they have to unwind at some point. So this is not over yet," he said.
"A VERY BIG THING"
The regional contracts, covering the Far East and the Mediterranean regions, have been trading electronically and by telephone since Feb. 25 and almost 500 lots -- equivalent to 32,500 tonnes -- of trade has gone through.
But several big producers, who have been enjoying pricing power amid sky-high global steel prices have repeatedly dismissed the idea of a futures market for steel.
Still, many dealers say the industry needs steel futures and that the contract should thrive over time.
"We see it becoming a very big thing," another second floor trader said.
Several market participants draw similarities with aluminium futures, which were dismissed when they were first launched 30 years ago.
"I don't see it taking that long," said Jean-Luc Fiorenzoni, head of steel price risk management at the world's largest independent steel trader, Stemcor, which trades around 20 million tonnes of steel a year.
"People understand the concept of derivatives much better than 20-30 years ago ... And we believe that the industry really needs them," he said.
The LME is also looking at expanding steel futures, possibly adding North America as a third region.
"We have our plans, we will monitor the progress," LME's Mr. Abbott said, adding the launch could come as early as the end of this year.
Mr. Abbott said the LME wanted to launch the first physically deliverable steel contract in the North America.
Meanwhile, if the current two contracts correlated, the Exchange might merge them.