The evolution of the iron ore derivatives landscape, such as the internationalization of the Dalian iron ore futures and launch of Shanghai Clearing House's cash-settled iron ore futures, is seen to be among the hottest topics at the Singapore Iron Ore Week.
In this video, Julien Hall, S&P Global Platts Metals Content Director in Asia, also explores other key topics to watch such as increased scrap usage and China's electric arc furnace production, which could affect the iron ore market.
Related event: Platts Ferrous Seminar & Market on Close Workshop
Video Transcript
Futures, scrap and impurities the key topics for Singapore Iron Ore Week
Julien Hall, Regional Metals Content Director, Asia
Welcome to the Snapshot, a series which examines the forces shaping and driving commodity markets today.
In this episode, we’ll take a look at the latest developments in the iron ore market as the industry comes together in Singapore for the 2018 Iron Ore Week.
Key topics in the market will be the ongoing evolution of the iron ore derivative landscape. One is the internationalization of Dalian iron ore futures early this month. The other one is the launch of Shanghai Clearing House’s own cash-settled futures happening as recently as early May.
These should provide interesting new opportunities for hedging and spread trading. Growing volumes on the SGX coking coal and LME scrap contracts are also part of the story, meaning the ferrous complex comes closer to having a full suite of derivatives at its disposal - the long-awaited Virtual Steel Mill.
In the physical market, the benchmark IODEX 62% Fe price has been moving less dramatically than in recent years: volatility has eased, with the market trading in a tighter range over the last 18 months or so.
Rather than iron ore, the big story has been steel - which, boosted by China’s capacity cuts and blue-sky policies - is still seeing prices at close to five year highs, with strong domestic demand resulting in a decline in the country’s steel export volumes. These policies had a number of other chain reactions across ferrous markets, with for example, record steelmaker margins playing havoc with iron ore impurity penalties - making it critical for the industry to have up-to-date information on silica and alumina differentials in particular.
Also worth keeping an eye on is increased scrap usage and a slow, long-term decline in pig iron - but not crude steel - output in China, as the country lifts electric arc furnace production. This could have potentially far-reaching and in some cases troubling implications for iron ore. For more details on this, please take a look at the latest report from Platts Metals Analytics, Beijing's Visible Hand, which looks at China’s iron ore and scrap demand through to 2020.
This year also marks a special birthday for a key member of this illustrious market: IODEX, the first daily spot price to be published in 2008, and the most widely-used benchmark today, is turning 10 years old.
To learn about all the latest trends in both the physical and paper markets, to meet the team or to celebrate our 10 years in the iron ore market, please come and join us for Platts’ Ferrous Seminar & MOC workshop on Wednesday 23 May at Marina Bay Sands Convention Center.
Until next time on the Snapshot, we’ll keep an eye on the market.