Looking to the future

Total Global Steel was formed in 1999, and since its inception has grown to become one of the UK's foremost independant Structural Steel Traders specialising in physical metal trading, futures and hedging, online trading and LME brokerage. 

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Steel Billet Futures

A year into their launch of the London Metal Exchange’s two steel billet futures contracts, have exceeded the expectations of many in the industry. Although many steel makers remain staunchly opposed to their introduction, a growing portion of the physical industry has welcomed the contracts and more and more players are looking at adopting their use in their day-to-day business.

Open interest and traded volumes have consistently grown, especially for the Mediterranean contract, and the exchanges official prices have reliably reflected business being concluded in the physical market. The exchange has now appointed the first steel-specific firm as one of its members. The LME approved Total Global Steel as a trade member of this exchange.

The company was delighted to have become a part of the LME and steel futures community and, having identified the potential in the LME’s steel contracts, Total Global Steel plans to add another service to its business, says CEO Martin Lonergan.

“We are fully supporting the LME’s two billet contracts and will do everything we can to market them,” he says. “In today’s steel market the risk management opportunities that these contracts offer will be invaluable, not just to our company but also to our customers and suppliers and companies throughout the steel supply chain.”

As a result, Total Global Steel plan to take a key role in bringing those steel companies that wish to get involved to the contracts, Mr Lonergan continues.

Total Global Steel is authorised and regulated by the Financial Services Authority (FSA) and offers access to steel price risk management for those steel participants that will be unable to do so directly through members of the exchange.

“Particularly in the present climate, many of the banks that are members of the exchange are reluctant to offer credit lines to a wide variety of steel companies, particularly given that so many companies in the industry operate with such narrow margins,” he explains.

“At the same time there are a lot of steel companies that only want to hedge a few hundred to a few thousand each month,” he continues. “Given that each LME contract is for 65 tonnes, this only equates to a few lots each month. This will not bring in enough revenue to make it worth the category.” Total Global Steel are able to offer a service to these difficulties. Following a buy or sell order from one of its customers, Total Global Steel will enter into the relevant LME position, depending on the market available at that time. Simultaneously, the company will then enter into an over-the-counter contract with the customer.

When the two positions come to fruition, Total Global Steel will close its LME position and settle the OTC transaction with its customer at the same price. “What we offer is market access. We are able to give companies that would otherwise be at the mercy of price volatility access to steel price risk management. The steel business does not have to be about speculating. Participating in the steel futures market will enable companies to develop so much more and encourage entrepreneurship in the industry, rather than gambling on what the price of steel will be tomorrow.”

“At the moment there is an attitude in the steel industry, particularly held by mills, where companies will try and make as much money as possible in the first six months of the year and hope that it will be enough to take them through the second half of the year,” Mr Lonergan adds. “This just isn’t a practical way to run a business.”

“If you’re asking someone to invest in you, you’re asking them to buy in your bottom line,” he continues. “Being able to lock in forward prices gives steel companies the ability to present a much more attractive prospect to investors.”

Total Global Steel has already begun indentifying areas of the industry that will stand to benefit from the LME’s steel contracts and, most recently, has begun talks with several major UK stockholders with regards to pricing construction steel for Olympic development projects in relation to the LME’s Mediterranean contract.

“The LME provides a solid and proven risk management system through its contracts, which we fully support and for which we provide quick and easy access to the metals industry,” he adds.

Total Global Steel is not just setting its sights on the steel industry – since becoming a member of the LME the company has also expanded its physical trading operations to smaller companies that have found access very difficult in the past.

 
Expansion in the Far East

Total Global Steel is expanding into the Far East with new branch’s open in Hong Kong and Shanghai, Director of the division Mr. Darren Barrows comments ‘The group has finalized plans to adopt a new divisional organizational structure which will better define our corporate function and responsibilities. Mr Barrows will have full responsibility for the operations, planning and leadership development for this. All current corporate accounting, credit, collections, and accounts payable personnel will become part of the Total Global Steel Western Hemisphere staff. Chinas high rate of economic growth has driven a search for new markets to sustain the country’s rapid expansions. In February of this year Total Global Steel has been able to secure deals that will allow the group a five million per year steel production deal. The new deal marks the latest expansion plans of the company. CEO Martin Lonergan comments “These are not easy markets to penetrate from the UK and we have been able to facilitate a successful CARES application and certification with Jiangsu Yong Gang, it will have a direct impact here in the UK, and has given us clear growth opportunities.”

As Yong’s exclusive UK partner, Total Global Steel played a key part in ensuring that the process of approval from application to assessment, from audit to certification, was as smooth as possible.

The total approval process was accomplished in less than 4 months, an impressive achievement for all involved given the size of the mill, the scope of the approval and testing, and of course, the significant amount of understanding (and information) required to be shared across both cultural and linguistic boundaries.

A key element in the successful application was the preparation work carried out by Yong with the support and experience of the Total Global Steel team both in London and China.

Before any application was made a survey was carried out by Total Global Steel to determine which specific production lines for both Coil and Rebar would be allocated for CARES approval. The companies then worked closely together to prepare all the relevant documentation (particularly with reference to ISO and product traceability), Total Global Steel experience as a UK CARES approved stockholder was critical in this preparation work.

The quality of the preparation work was fully noted and appreciated by the CARES officials during both the assessment and the audit; all information was readily available and translated (by Total Global Steel) and the sampling preparations and aging process was conducted in a thorough and effective manner.

The samples of each size were sent to the UK to approved BS testing laboratories for both Fatigue and Mechanical examination, and every size diameter passed these stringent tests. Total Global Steel was present during the complete assessment and audit of the Yong Gang mill, and continued to act as a contact point in the UK and Shanghai as the final results of the testing and audits were ratified by CARES, dealing with any questions and supplementary information that was required.

The final result is that we are delighted to confirm that Yong Gang are now able to supply Total Global Steel both grade B500B and B460B CARES approved Steel in Coiled Rebar between 6mm and 12mm diameter and Rebar between 10mm and 40mm.