New option for ferrous scrap futures

Commodity price reporting agency Davis Index has announced the launch of the world’s first decentralised futures contracts for recycled steel.

Davis Index’s new exchange-settled daily contracts are for bulk exports of ferrous scrap shipped to Turkey and for containerised shredded scrap shipped to India. The Turkish contract will settle on a basis of Davis Index US-origin HMS 1/2 (80:20) bulk cfr Turkey index. The Indian contract will settle on a basis of Davis Index containerized shredded cfr Nhava Sheva index.

They will launch on Mettalex, a decentralised exchange for commodities trading, on 31 May. Mettalex launched its blockchain-agnostic exchange, which is available on Ethereum and Binance Smart Chain, in February. The exchange enables traders to take leveraged long or short positions against a number of commodities including steel recyclables, zinc, iron ore, and spreads for digital currency.

Risk-efficient access 

Davis Index argues that hedging tools remain largely inaccessible by small and medium-sized enterprises due to high costs. Additionally, commodity market participants face obstacles related to front running, poor liquidity, price manipulation, and loss of value in the form of margin calls. Mettalex is said to solve these problems by allowing physical asset holders a cost, capital, and risk-efficient access to commodities markets, enabled by DeFi liquidity, and automated by blockchain-based smart contracts.

Current system ‘unworkable’

‘The ability to hedge the numerous recyclables grades and specialty finished products that make for most of the infrastructure around us has long been a need in our industry,’ says Sean Davidson, ceo of Davis Index. ‘The current system provides the industry with less than a handful of instruments and the basis risk and costs are just unworkable for most companies. Mettalex is finally answering the call for a decentralised exchange that can list any commodity.’

Davis Index is a tech-led proprietary market price data provider for the global manufacturing supply chain. It carries six price reporting platforms in its portfolio which include the world’s only market intelligence platform built solely for the manufacturing chain.