Managing Volatile Steel Prices with the Virtual Steel Mill

Oct 14, 2013, 14:02 ET from CME Group

CHICAGO, Oct. 14, 2013 /PRNewswire/ -- For the last decade, China's infrastructure growth has meant a steadily increasing demand for steel, and an increase in steel prices globally. With it has come volatility for all the parts of the steel supply chain that go into making bridges and roads and buildings, including iron ore, steel scrap, coking coal and steel billet.

But growth isn't only happening in China. The World Steel Association expects worldwide steel consumption will grow at a three percent rate in 2014.

This kind of widespread growth, and potential market volatility, could mean a larger role for steel futures. In the runup in world demand, futures became a viable tool for managing price risk for firms like steel mills and appliance manufacturers. Though at different ends of the supply chain, these kinds of firms could find the appropriate method of off-setting risk in a suite of products CME Group calls its Virtual Steel Mill.  As the rate of growth in China and other emerging economies slows, the products may once again be the place where firms in the steel supply chain can protect against volatility.

This infographic demonstrates how that supply chain works, and the Virtual Steel Mill of risk management products that aligns with each area.

As the world's leading and most diverse derivatives marketplace, CME Group ( is where the world comes to manage risk.  CME Group exchanges offer the widest range of global benchmark products across all major asset classes, including futures and options based on interest rates, equity indexes, foreign exchange, energy, agricultural commodities, metals, weather and real estate.  CME Group brings buyers and sellers together through its CME Globex® electronic trading platform and its trading facilities in New York and Chicago.  CME Group also operates CME Clearing, one of the world's leading central counterparty clearing providers, which offers clearing and settlement services across asset classes for exchange-traded contracts and over-the-counter derivatives transactions. These products and services ensure that businesses everywhere can substantially mitigate counterparty credit risk.

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