Wednesday, October 13,
The upswing in Iron ore demand, coupled with a change in the way Spot Iron ore is priced, could drive manufacturers and traders to rely heavily on the derivatives for risk management.
The volume of Iron ore traded in swap has risen by 12.5% to reach 2.5 million tonnes in the current fiscal.
More volatility is seen the market with the demise of the decade old benchmark system. So the use of derivatives in Iron ore market is expected to grow in future.
Singapore metal exchange (SMX) has announced recently to launch its first Iron ore futures contract. On a similar move, Indian Commodity Exchange Ltd (ICEX), the country’s third biggest commodity also aims to launch the India’s first Iron ore contract in a few months.
On the flip side, LME which is considered as the biggest electronic platform for industrial metals seems reluctant to launch Iron ore contracts. When asked about reasons, LME officials said “it would be very difficult, nearly impossible to make Iron ore deliverable”.
So, While LME likes to think that physical delivery is its secret weapon behind the success of its Futures contracts; it may lose the battle for market share in exchange trading of Iron ore as other major International exchanges have already announced their entry into Iron ore Futures trading.
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