Europe's stainless steel industry is no longer uniformly opposed to an exchange traded contract, industry expert Heinz H. Pariser said on Friday. Pariser, who has nearly 50 years experience in the metals industry, said two of Europe's five main stainless steel producers are now open to the idea of a contract.
"Two big producers are more positive about that (but) it will take another three years before it will be discussed widely enough and accepted in the industry," said Pariser, who heads Heinz H. Pariser Alloy Metals & Steel Market Research. Earlier this week, Finnish stainless steelmaker Outokumpu said it does not support an exchange traded contract because stainless steel is not commoditised enough for a contract to add value.
But Pariser said while marketing managers at stainless mills tend to be opposed to a contract, those in the finance divisions have a more positive view. He declined to give names. Europe's other top stainless producers, ThyssenKrupp Stainless, Acerinox SA, and ArcelorMittal have not made their views known, but Arcelor has long been opposed to the LME steel billet contract. "We have in China two exchanges that you can trade stainless on, that seem to work. The one is in Foshan and the bigger one in Wuxi. They store 400,000 tonnes of stainless steel," he said.
Pariser said he believes the Chinese exchange might trade spot contracts for stainless, but that a Europe based contract should take the form of a physically backed futures contract. He conceded, however, that there were numerous problems with launching stainless steel futures. "There are a few issues, the quality, the grade, the dimensions. Its not simple but when a nickel contract was introduced we had 63 different nickel products, and they cut it down to the lowest common denominator."
At present, investors can trade base metals and steel billet futures on the London Metals Exchange, but Pariser said it is unlikely a stainless contract will emerge on the LME. "For stainless people, for any steel people, they have no experience or feeling for the LME exchange," he said. The stainless steel industry accounts for about two thirds of demand for nickel - a metal that has outperformed all others this year thanks to surging stainless output. Pariser, one of the first nickel traders on the LME, said the benefits of an exchange traded contract have been clearly demonstrated in nickel, and stainless is no different.
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