SGX and China Beijing International Mining Exchange Collaborate to Develop Iron Ore Market

Singapore Exchange (SGX) and China Beijing International Mining Exchange (CBMX) have signed a Memorandum of Understanding (MOU) to cooperate in the development of both Chinese and international iron ore markets. The agreement was signed in Singapore at the Singapore Iron Ore Week 2013, between Dong Chaobin, President of CBMX and Magnus Böcker, CEO of SGX.

CBMX operates the iron ore spot trading platform in China, which was jointly initiated by China Iron and Steel Association (CISA) and China Chamber of Commerce of Metals Minerals and Chemicals Importers and Exporters (CCCMC). Since its opening on 8 May 2012, more than 13 million metric tonnes of iron ore have been traded. The trading pattern of the platform and the base price it generates, are gradually gaining market influence. SGX AsiaClear is the pioneer commodities OTC clearing service in Asia and enjoys over 90% global market share in the clearing of iron ore swaps.

Under the MOU, both exchanges will jointly explore areas of cooperation including product development, market development and information sharing. CBMX and SGX will also explore a medium-term roadmap towards improvement of interaction and risk-transfer between the spot and derivatives markets.

An important “first” in the global iron ore market, this landmark agreement brings together an international derivatives clearing platform with a Chinese physical spot trading platform. The physical iron ore seaborne market in Asia has seen significant growth in the last few years, driven by China’s continued industrial development and consequent demand for steel production. The derivatives market has developed alongside as the complementary risk-management and hedging tool against price volatility. SGX cleared a record 109 million metric tonnes of iron ore swaps in 2012, representing growth of almost 2.5 times over the previous year.

“As the only iron ore spot trading platform in China, we hope that through cooperation with SGX, we can promote the use of both the spot and derivatives platforms as trading and risk management tools. This will help iron ore market participants to achieve effective and efficient interaction between the spot and financial derivatives markets”, said Mr Dong.

“Through this agreement, we continue to build on our commitment to expand the reach of our markets and clearing capabilities to Asia and globally. Closer collaboration between the various physical marketplaces and our derivatives market sets an ideal foundation for growth. It also aligns our respective platforms more effectively to the benefit of all market participants. We look forward to working closely with CBMX,” said Mr Böcker.