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[MANILA] The Singapore Exchange said on Thursday it will launch iron ore lump premium swap and futures contracts on Aug 31, hoping to provide more hedging tools for market participants managing risks amid volatile prices of the raw material.
SGX already offers iron ore swaps and futures based on 62-per cent grade fines, or granular iron ore that must be treated before being fed into blast furnaces.
About 70 per cent of iron ore that top consumer China currently buys is in fines and 20 per cent in lump, seen as cleaner as it does not require treatment before blasting and melts more quickly.
The new contracts "will offer the industry an opportunity for price risk management of iron ore lump, which until now was an unhedgeable risk," Abhimanyu Krishnamoorthy, iron ore trader at Cargill International, said in the SGX statement.
Each lot of the new swap contract will be 500 tonnes and each futures contract will be 100 tonnes per lot, SGX said. They will be cash-settled off the Platts iron ore spot lump premium 62.5-per cent China index reference price, the bourse said.
SGX, which began clearing iron ore derivatives in 2009, saw volume of iron ore swaps, futures and options reach a record high 111 million tonnes in July, according to the bourse's website.