The use of independent assessments of steel prices has increased dramatically in recent years. Traditionally such price assessments have been used by physical buyers and sellers as a means to benchmark their recent transactions. Whilst in some instances they are still mostly used in this way, price assessments are now increasingly being utilised by both steel industry, and financial market participants in other ways.
The growth in the use of independent assessments of steel prices has been particularly the case since 2004, reflecting the significant increase that has been observed in steel price volatility. In some markets, independent assessments of steel prices are now being used in:
Our assessment of U.S. hot-rolled coil is used in the settlement of CME Group’s ‘U.S. Midwest Domestic Hot-Rolled Coil Steel Futures and Options Contracts’, which were launched in October 2008 and December 2011 respectively.
CRU has a policy of developing its assessments of steel industry prices in tandem with how they are being used by both the physical and financial communities, and also with the type of price data available.
There are 3 separate tiers of price assessments; Level 1.0, Level 1.5 and Level 2.0
The Level 1.0 assessments (currently over 120) are managed entirely by the Steel team within CRU Analysis – a separate division of CRU.
The Level 1.5 and Level 2.0 assessments are managed by CRU Indices. The main distinction between the assessments managed by CRU Analysis and CRU Indices are:
Currently, there are over 120 steel price assessments classified as “Level 1.0 Price Assessments”. The main features of these assessments are the following:
To view the full list of Level 1.0 assessments click here.
A full and complete guide to CRU’s “Level 1.0 Price Assessments” is available. For more information, please refer to the “Level 1.0 Price Assessments Operations Manual”.
Eventually we will migrate all Level 1.0 assessments to Level 1.5.
CRU’s “Level 1.5 Price Assessments” are those that are starting to be used in physical contracts, and are showing potential to evolve to financially traded contracts. For these assessments, some aspects of the data collection/calculation procedures have been enhanced:
A full and complete guide to CRU’s “Level 1.5 Price Assessments” is available. For more information, please refer to the “Level 1.5 Price Assessments Operations Manual”.
CRU’s “Level 2.0 Price Assessments” will generally include those which are already used extensively in physical contracts, and any financial contracts that may exist. For these assessments, some aspects of the data collection/calculation are further enhanced:
The evolution of individual price assessments from “Level 1.5” to “Level 2.0” will take place only once extensive discussions have taken place with market participants and appropriate research has been conducted by CRU’s Steel Team analysts. It will include a “transition stage” during which individual assessments will be calculated using both “Level 1.5” and “Level 2.0” procedures. The resulting assessments will be compared and only when the statistical differences have been eliminated, and general market acceptance has been achieved, will CRU make the transition to “Level 2.0 Price Assessments”.
A full and complete guide to CRU’s “Level 2.0 Price Assessments” is available. For more information, please refer to the “Level 2.0 Price Assessments Operations Manual”.
CRU maintains a policy to report accurate price assessments, regardless of the procedures employed. The evolutionary development approach allows CRU to work with market participants at different levels of data transparency to provide accurate and timely price information. In line with CRU’s stated policy, each of its assessments of steel prices (regardless of what stage they are currently at) will continue to evolve in tandem with how they are being used by both the physical and financial communities.