Uniform pricing for steel from April

Global pricing system SteelBenchmarker to auto generate independent prices.

The steel industry is headed for a systematic pricing regime with the launch of the SteelBenchmarker, a global pricing system, in April 2006.

Mooted by World Steel Dynamics and Metal Bulletin with some of the international commodity trading consultants, SteelBenchmarker would auto generate independent prices across various global markets for some basic steel products.

The benchmark price could then be used for contracts for futures and spot trading in commodity exchanges like Nymex, London Metal Exchange and Chicago Mercantile Exchange.

Participation from mills across the world were being invited and a number of steel majors from India were understood to have evinced interest.

The steel benchmark prices generated by the SteelBenchmarker system were expected to be derived from at least 1,000 price opinions providers consisting of steel mills, steel traders, steel service centres, large and small steel users and steel scrap processors.

The providers, in turn, were expected to provide, twice a month, at least 2,000 price opinion data points.

The idea was to provide the steel industry and the financial trading industry with an investable and robust steel benchmark price.

The two publications, responsible for the concept, have explained what was meant by investable and robust in their manual.

By investable, what was implied was exchanges and firms engaged in over-the-counter transactions would be able to use the steel benchmark prices to create financially settled prices""no physical delivery""that permit the forward hedging of risk.

It was expected that the pricing system would be robust as there would be many providers and results would not be manipulated.

Each provider's price inputs by product would never be seen by any person or group at any time.

Among the salient features of the pricing system were product coverage and regional coverage.

Product coverage would entail benchmark prices for commodity-grade hot-rolled band, cold-rolled coil, rebar, standard plate and shredded steel scrap.

For the products, the regions would include the US (east of Mississipi), western Europe, mainland China and the world export market. However, for steel scrap, the region was the United States, east of Mississipi.