What is Steel?
Steels are alloys of iron along with other elements in particular carbon. Often a common material used in building construction and other applications due to its high strength and low costs. Carbon, other elements, and inclusions within iron act as hardening agents that prevent the movement giving it its renowned strength.
The carbon in typical steel alloys may contribute up to 2.1% of its weight.
Uses of Steel
Steel is used in a large number of products, some of these include:
- Construction of roads
- Concrete structure will employ steel for reinforcing
- White goods (e.g. washing machines)
- Heavy equipment (e.g. bulldozers)
- Office furniture
- Steel wool
Risks of Steel
Like any futures contract there is always the possibility that the underlying asset i.e. steel will move in the opposite direction to which you hold your contract. For example: you have taken a long position (expecting the price of steel to rise), if this were to happen and the platinum fell in price, your long position in steel will decrease in value.
With any commodity, supply and demand will affect the price dramatically if there is a change, this risk is one that should be monitored on a regular basis and adjusted to suit your risk parameters.
Mining of metals has an inherent risk with the level of costs associated with extracting the product from the earth. This can include, but not limited to: the cost of oil to fuel machinery, cost of labour or new tax regulations being implemented.