EoW November 2012

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Transatlantic cable
November 2012 28
Steel
A new scrap futures contract for the
US will target recyclers, mini mills,
and construction companies
Only days before creating news with its plans for a for a
derivatives market in London (”Futures Markets,” above), CME
Group Inc said it had set a 10 th September launch date for the
US scrap futures contract announced by the company in June.
This will be the second scrap contract and the 13th steel and
steel raw materials derivative product for the Chicago-based
exchange.
The extension of its reach in ferrous derivative products has
a basis in CME’s perception of growing interest in hedging
among recyclers, mini mills which use scrap as raw material, and
construction companies which buy long steel products derived
from steel scrap.
While the contract, to be cash settled against an index price set
by the metals trade publication AMM, is focused on the United
States – the industry’s largest scrap exporter – CME has said that
it hopes its price will become a global benchmark.
US investment banks including JPMorgan Chase were reported
to be interested in the new CME contract. Again according to
Reuters, the contract could bene t from declining interest in the
four-year old physically backed steel billet futures o ered by the
London Metal Exchange.
With a growing investor base and greater liquidity in its US
hot-rolled-coil (HRC) contract, CME is also working on launching
ferrous contracts in China, the world’s largest steel producer and
consumer.
The contract announced 17th August is subject to regulatory
approvals.
Whether or not Bain Capital brought
down GST Steel, the newcomer Custom
Truck & Equipment is an unquali ed success
On the presidential campaign trail this summer and autumn,
Republican challenger Mitt Romney relied heavily on his
tenure as head of the Boston-based private investment rm
Bain Capital to showcase his executive credentials. Supporters
of the incumbent, Barack Obama, took a contrary view: that
Mr Romney during his tenure as CEO presided over the
destruction of American rms and jobs in the interests of Bain
and its investors.
A political TV ad produced by the Obama campaign featured
an interview with a couple whose life took a sharp turn for the
worse after Bain forced the closure of a Kansas City, Missouri,
steel plant, at the loss of 750 jobs. When the Romney people
found and trumpeted some holes in the su erers’ story, the
extent of Bain’s culpability, if any, was lost in the resulting din.
Yet again, the murky politics of an election season had crowded
out sober evaluation.
Writing in the Kansas City Star, Lee Hill Kavanaugh suggested
that another important story had been obscured in the media
coverage of the closure of GST Steel Co, whose steelmaking days
may be over but whose former plant oor is far from idle. Itself a
successor of an Armco Steel plant at the site, GST was succeeded
in turn by Custom Truck & Equipment, known as CTE, which
believes it is the biggest provider of truck cranes in the world.
Its business is booming. (“CTE’s Success Is a Quiet Chapter in
Story of GST Steel’s Demise,” 17th August)
The family operation sells new and used trucks, truck parts,
cranes, cement mixers, and engines. About 170 people work at
CTE, retro tting the industrial vehicles in 28 bays. “Basically, we
think of this place like a seashell,” Fred Ross, president and eldest
of 12 siblings who grew up in the area, said of the old plant.
“It’s the same as if one animal died and then another moved in.”
The enterprising Rosses bought about 18 acres of the GST
property and spent $6mn gutting the old mill to its skeleton
before refurbishing. CTE is building two more structures on an
additional 35 acres acquired from GST, which itself purchased
300 acres of Armco’s roughly 1,000-acre property, where heavy
metals still contaminate the soil in spots. CTE also has three
locations in Texas and recently expanded into Wisconsin.
† On the day of Ms Kavanaugh’s visit to the Kansas City plant,
23 trucks were parked in a ruler-straight, ve-row formation.
“A bumper crop,” she pronounced it. “Everywhere one looked,
gleaming trucks were within a screwdriver’s reach.”
Acknowledging his satisfaction at the new life in the old
place – with Americans “making things that are being
sold and shipped all the way to Mongolia” – Mr Ross also
noted his family’s frustration at the duelling TV ads of
the recent political season. He wishes that the cameras
panning over the site had taken in just a little more than
the still-empty and padlocked buildings from the Armco
era. “It would have shown more of the story,” wrote
Ms Kavanaugh. “The CTE chapter.”
Elsewhere in steel . . .
† AK Steel (West Chester, Ohio) announced that, as of
4th September shipments, it increased transaction prices for
all Type 201, 301, 430, 430 Ultra Form®, 409 and 409 Ultra
Form at rolled stainless steel products. The company said
that prices for its Types 409 and 409 Ultra Form products
were raised by two cents per pound. Increases on the other
steels were to be achieved through a two-point reduction
in the functional discount. All of AK Steel’s raw material
surcharges for stainless steel products, including those for
materials under 0.015" in thickness, remain in e ect.
Commerce
Overseas-minded American
companies are advised to forget the
BRICs, cultivate the CIVETS
“The past decade was all about the BRICs, the massive
economies of Brazil, Russia, India and China, which kicked
o at the beginning of the new century, boomed, and are
now slowing. Taking their place is a new group of fast-rising
economies promising businesses outsized returns.” Business
Without Borders, an online platform for US businesses
looking to expand beyond their national borders, de nes this
group laying claim to the next decade as the CIVETS: Colombia,
Indonesia, Vietnam, Egypt, Turkey and South Africa. Taken
together, the rising middle class, young populations and rapid
growth rates of the CIVETS are seen to “make the BRICs look
dull in comparison.”