SGX 58% Fe iron ore derivatives see active launch day

The Singapore Exchange (SGX) has seen an active launch day on Monday March 9 for the latest addition to its iron ore derivatives portfolio.

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At least five trades have gone through on the first day of the SGX’s listing of lower-grade iron ore derivative contracts, with activity concentrated on the contract settling against Metal Bulletin’s 58% Fe Premium Index, brokers told Steel First.

A March contract was traded outright at $50.25 per tonne cfr Qingdao and April traded at $49 and $49.50 per tonne.

The April contracts were also traded as part of spread trades with TSI’s 62% iron ore index with a spread at $8 per tonne.

Counterparties of these trades included Chinese and international trading houses and Chinese mills, while brokerage firms involved included Clarksons, ICAP, SSY and FIS.

“We are pleased to see a great deal of positive interest in the new SGX MB58 contract launched today. We have every reason to believe that it will become a valuable tool for the industry in the future and are delighted that the settlement price is based on the benchmark Metal Bulletin 58% Premium Iron Ore Index,” Metal Bulletin md Raju Daswani said.

Clarksons’ head of bulk commodities Andrew Glass said the launch of the 58% Fe contract has been “eagerly anticipated, particularly by the physical market participants”.

“This was reflected by our customers’ eagerness to be the first to trade and thereby encourage liquidity both as an outright contract and spread with the 62% Fe contract.

“We are confident that financial participants will follow closely behind those with a more physical business to embrace and inject liquidity to make this a robust contract with tight physical correlations and convergence,” he added.

ICAP’s head of bulk commodities for Asia Alex Newman believed the trading activity today showed the maturity of the market.

“There is need for a 58% iron ore index to allow value trade between the qualities. It adds another layer of complexity to the [iron ore derivatives] market, allowing participants to express their views on different qualities,” he said.

Jamie Pearce, head of SSY Futures Singapore, said the firm anticipated good support for the contract from both new comers to the market as well as exiting traders.

The SGX offers clearing services for two 58% Fe iron ore derivatives contracts. The swaps and futures contracts are cash-settled against either Metal Bulletin’s 58% Fe Premium Index or TSI’s 58% Fe iron ore index.

For the methodology on Metal Bulletin’s 58% Premium Index please click here.