Iron ore derivative volumes hit new record
London, September 5, 2011
The volume of iron ore derivative contracts cleared using The Steel Index (TSI’s) iron ore price index hit a new record of over 6.6 million tonnes in August registering an increase of over 50 per cent on the previous monthly record set in July.
The nominal value of these derivatives - including swaps and options - exceeded $1 billion in a single month for the first time, said a statement from the TSI, the premier specialist source of independent iron ore, steel and scrap price information based on actual transactions.
TSI said it is also currently developing coking coal reference prices.
The majority of swap contracts were cleared by Singapore Exchange (SGX), which processed 8,554 lots in August, equivalent to 4.3 million tonnes, it stated.
This represented an increase of 11 per cent on its previous monthly record. The volume of ‘open interest’ on SGX also reached a record high of 8,661 lots (4.3 MT), up 38 per cent on the July peak.
CME Group enjoyed a particularly marked increase in iron ore trading activity, clearing over 2 MT of derivatives basis TSI, of which 1.5 MT were options.
LCH.Clearnet (London), NOS Clearing (Oslo) and Indian Commodity Exchange (Mumbai) also cleared iron ore derivatives contracts basis TSI in August.
“The iron ore derivatives market continues to gain traction with greater numbers of participants now comfortable trading higher volumes and a wider range of financial products,” commented Oscar Tarneberg, senior analyst, Asia, at TSI.
“We are delighted to witness such an increase in market players’ confidence,” remarked Gabrielle Richou, manager at the Iron Ore and Steel Derivatives Association (IOSDA).
“Liquidity risk is starting to diminish, which should encourage a new wave of market participants entering in the coming months,' she added.
TSI reference price for 62 per cent Fe iron ore fines ended the month at $179.9/dry metric tonne cfr Tianjin port, the highest level since 6 May 2011, bringing the August monthly average to $177.45/dmt – up 2.6 per cent from July.
Since their launch, more than 55 million tonnes of iron ore financial contracts have been cleared basis TSI, with a nominal value of over $8.6 billion. This represents over 95 per cent of all iron ore contracts cleared during the past two years.-TradeArabia News Service