First trades of the CME’s new U.S. Midwest Domestic Steel Premium Futures contract settled on CRU

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First trades of the CME’s new U.S. Midwest Domestic Steel Premium Futures contract settled on CRU

Chris Houlden

Head of Steel View profile

The Chicago Mercantile Exchange’s (CME’s) new U.S. Midwest Domestic Steel Premium (CRU) Futures contract has commenced trading.

This is settled on the premium of CRU’s US Midwest HDG coil base price over the US Midwest HR coil price. A trade of 100 short tons per month, at $150/ s.ton. was executed for H2 20 on Friday 12 June.

Since 2018, the physical base price of HDG coil averaged $831 /s.ton while HR coil averaged $682 /s.ton. The difference between these two prices is the premium referenced by this futures contract, which has averaged $149 /s.ton with a high of $213 /s.ton and a low of $75 /s.ton in the same period.

The new cash-settled contract is a hedging tool that allows market participants to trade and hedge the spread, or premium, between HDG base (excluding coating extras) and HRC prices. It enables new hedging strategies in their own right and in conjunction with the existing U.S. HRC futures contract, which settles on CRU’s established Midwest HRC price. In particular, the Premium futures contract can be important for intermediaries who procure HRC and sell HDG material where hedgers can lock in a margin between the two products.

CRU’s US Midwest flat-rolled product prices are transaction-only weekly price benchmarks. Use of transaction data alone as data inputs to this price ensures they accurately reflects the actual spot market with no risk of information from sentiment, errant opinion, speculative or even confirmed but ultimately unexecuted bids and offers entering the published price. For more detail on applicable methodology and definitions, please click here.

To learn more about CRU’s US Midwest and other North American prices click here.  For more information on CRU’s price, analysis and forecasting services and how they can help your business, please visit our website or email steel@gzltzsjt.com. For more information on CME Group, please email metals@cmegroup.com.

Chris Houlden

Head of Steel View profile