SGX’s high-grade Fe ore derivatives top 150,000 tonnes traded on opening day

The new 65% Fe iron ore derivatives launched by the Singapore Exchange (SGX) have registered 150,000 tonnes of cleared trades on their first day of trading, the exchange said on Monday December 3.

Launched in response to calls for more efficient risk-management tools in the steelmaking raw materials market, and settled against the daily MB 65% Fe Iron Ore Index published by Fastmarkets MB, the SGX’s high-grade iron ore derivatives saw trading in individual calendar months, calendar spreads, quarters and spreads against the SGX’s existing 62% Fe contract, to which the new derivatives are a complement.

Both physical market participants seeking to hedge their exposure to high-grade ore and financial participants looking to bet on the shift in Chinese economic policy made use of the derivatives on their opening day, the SGX said, with Anglo American, Gerald Metals, Glencore and Goldman Sachs among them.

“As a high-grade producer, we believe the SGX 65% Fe contract will enable more accurate risk mitigation for the more volatile high-grade products,” Andrew Glass, head of financial trading in iron ore at Anglo American, said in a statement.

“Further, given the market’s shift in demand to high-grade mill feedstock, the advent of a high-grade derivative contract is a welcome development for industry participants.”

GMs and trading heads from Citi, Goldman Sachs, Mitsubishi and Trafigura were among others also praising the new contract. 

Fastmarkets MB’s 65% Fe Iron Ore Index stood at $82.90 per tonne cfr China on Monday, up $0.60 per tonne from Friday but still well below its 2018 high of $98.60 per tonne on October 29.

Steel raw materials editor Deepali Sharma and index manager Peter Hannah will be discussing the new SGX 65% Fe derivative contract in a live webinar on December 11. They will examine how changes in the iron ore market have prompted the need for this high-grade derivative, the opportunities the contract offers and the methodology behind our iron ore index. Register here for Fastmarkets MB’s SGX 65% Fe derivative contract webinar.