For those who love all things metal, this has been the best of times and the worst of times. It will be many years before another former Alcoa chairman romps through Africa with Bono and gets sacked as Treasury secretary in the same year. Keep this episode in mind for Trivial Pursuit games with your grandchildren. And remember, that Larry Lindsey trading card could be worth something someday. On the other hand, various representatives of the global steel industry, the greatest group of corporate panhandlers since airlines were invented, have opened exploratory talks with the London Metals Exchange about starting steel futures. I'll write the headline on this one: "Steel Industry Brass Emerges From Stone Age." Besides, the likely marker grade to be traded will be hot rolled coil, and won't that have some possibilities as a conversation starter in London watering holes?
Market Analysts Cheer
One of the many social benefits (seriously) of futures markets is their ability to moderate price cycles both by facilitating a market for storage and by providing price signals for market participants on future supply/demand imbalances. Steel has a couple of minor problems for actual physical storage: It has myriad grades and alloy mixtures, and it has an annoying tendency to rust. The NYMEX unleaded gasoline futures contract has, to some extent, overcome similar grade and deterioration problems. The forward curve and price trends of steel futures will provide valuable economic information for market analysts, a group that society simply doesn't thank often enough. Metals buyers are an unimaginative bunch unlikely to risk either running out of necessary supplies or to take a speculative fling on an ingot or two. Industrial base metals are bought shortly ahead of when they will be needed, and their price constitutes a remarkably sensitive economic barometer.