Caravel, Gunvor, H&C S Holdings first to trade SGX 58% iron ore derivatives

Caravel Metallurgical, Gunvor and H&C S Holdings were the trading companies involved on the launch day of the Singapore Exchange’s 58% Fe iron ore derivatives contracts on Monday March 9.

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Some 55,000 tonnes of iron ore futures, based on Metal Bulletin’s 58% Fe Premium Index, were cleared on Monday, SGX said on Tuesday March 10.

The deals were brokered by Clarksons, ICAP, SSY and FIS, Steel First understood.

Gunvor iron ore trader Adam Farthing said more than 35% of all Australian iron ore exports will be sub-60% Fe this year and that the change in the mix has caused the spread between 62% and 58% Fe ores to become wider and more volatile.

“The new 58% Fe iron ore swap, will provide market participants with a liquid contract to hedge lower-grade ores, thereby removing a large part of the basis risk,” he said.

“At the same time, this contract will create an observable forward curve for low-grade ore, and by extension, for the differential between 58% and 62% Fe ores.

“With more certainty about its true value, producers and consumers of this material will be able to deploy capital in a more efficient manner,” Farthing added.
Caravel trader Kerry Deal said the new contracts “will create a fantastic new option for market participants wishing to hedge their exposure to different grades”.

Caravel did the first trade when CME Group launched the 58% Fe contract in December last year.

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