Reuters reported that an LME approved billet warehouses in Italy is unlikely to attract much Turkish material as warehouses in Turkey open to Turkish material are necessary to get domestic producers involved with the LME billet contract.
Mr Namik Ekinci chairman of the Turkish steel exporters association and CEO of Turkish steelmaker Ekinciler said that "It doesn't seem like Turkish producers will use the warehouse in Italy because we prefer Turkish warehouses to be open to Turkish products."
Mr Ekinci said that we think that this issue was delayed also because of the elections. There was a change in the government so we hope the new minister will accelerate this issue. We hope that in the coming days there will be more warehouses in the Ismir and Iskenderun regions. That it will provide a service to the Turkish market and liquidity should increase.
Ekinciler buys and sells small lots of LME billet but said that liquidity needs to increase for the contract to become a more reliable instrument. The chairman of the steel trader association was also open to new steel derivatives contracts such as swaps which brokers and exchanges have recently started to offer.
Mr Ekinci said that swaps work in other markets so we expect that it will also work in the steel market and if it works it will be beneficial for us. We are helping the Chicago Mercantile Exchange and other derivatives providers to make these products more available in the market and to spread information in the industry.
Earlier this month, the London Metal Exchange approved Ravenna, in northern Italy, as a delivery point for non domestic steel billet from September 16th 2011 in a bid to attract more liquidity to the market. Some in the market believed the Italian warehouse would attract billet from Turkey, one of the largest producers.
LME warehouses in Turkey are still not able to fully function because of the complexities of obtaining a variance to VAT regulations affecting the storage of domestic steel.
(Source: www.steelguru.com )