JP Morgan is looking to expand its physical steel trading activity to help manage its positions in the ferrous derivatives market, which is bound to grow noticeably, the bank told Reuters in an interview on November 07. "We already move some billet. We are looking at expanding physical trading," said Jeffrey Kabel, executive director for global ferrous products at JP Morgan.
"It would help us to manage our financial positions and to hopefully offer greater liquidity to both our clients and the market in general."
A number of banks have entered the steel and iron ore derivatives market in the last few months, attracted by the large size of the market in terms of volumes and by its growing liquidity.
Some banks are also venturing into physical iron ore and steel trading to better manage their financial positions and to help forge financing deals for mining companies, steelmakers, automakers and construction companies. Iron ore derivatives volumes grew to over 9 million tonnes in October from 4 million tonnes in July, helped by more volatile prices and a push towards shorter contract pricing. Steel derivatives are also growing but at a slower pace, because the market is divided into a number of disparate contracts that reflect a variety of products and different regional markets, which tends to dilute liquidity.
"Iron ore will probably grow quicker than steel because more people are looking at it," Kabel said. "It is a global contract, it's clearer to understand, there is more liquidity and there are more financial players, yet it is still only one price risk element in the ferrous chain."
Comments
Comments are closed.