High-grade iron ore derivative reaches second highest monthly traded volumes

The total traded volume for the high-grade 65% Fe iron ore futures on the Singapore Exchange (SGX) rose in January 2020, with 25,750 lots - or 2.575 million tonnes - being cleared as of January 20 at 2:30pm Singapore time.

The latest total traded volume is the second highest recorded since its launch in December 2018, and represents a 13.9% increase from 2.26 million tonnes in September 2019, which was previously the second most traded month. October 2019 saw a record 38,020 lots – or 3.802 million tonnes - traded during the month.

Last month, a total of 1.99 million tonnes of the contract was traded, up by 4.6% year on year.

In the whole of 2019, close to 20 million tonnes of the contract, which is settled against Fastmarkets’ daily index for iron ore 65% Fe Brazil-origin fines, cfr Qingdao, changed hands.

The index averaged $96.10 per tonne in November and $102.71 per tonne in December. It is averaging $107.82 per tonne so far this month.

Market participants attributed the increase in price for the high-grade fines index to firmer demand from Chinese steelmakers coupled with limited supply.

Environmental protection curbs imposed by local authorities in China over the winter heating season typically prompt mills to consume more high-grade iron ore to improve its production efficiency, while restocking by Chinese mills ahead of the week-long break for Chinese New Year from January 24-30 has also supported the market.

A Singapore-based trader said adverse weather has disrupted logistics at the Vale-operated port of Ponta da Madeira, in the northern Brazilian state of Maranhão, further limiting supply of Carajas iron ore.

Some traders also pointed to a 26% year-on-year drop in Brazilian iron ore exports last month as adding further strength to prices.

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